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Update: More Parcel Shipping Drama, as UPS and FedEx Levy New Surcharges, as the USPS Struggles with Volume Surge

 

Big Brown and Rival FedEx Apply Peak Season Surcharges – in June!

June 3, 2020
SCDigest Editorial Staff
     

Update: Our original story below said UPS rival FedEx had not added new surcharges for some large shippers and oversized parcel.

 

News now though that starting June 8, FedEx is adding a 30-cent surcharge of 30 cents to all packages by customers which send more than 40,000 packages a week if their weekly shipping volume is more than 120% of its average volume in February.

As with UPS, FedEx will also start charging $30 extra for all oversize deliveries.

The coronavirus crisis has already has already had a major impact on the parcel shipping sector, as volumes surged for on-line orders made by consumers in lock down mode at their homes.

For example, we reported that UPS announced that its main US parcel delivery business saw its operating profits fall by 40% in Q1, even as home deliveries soared.

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Reports are that often USPS delivery status on a package is simply not available, or are not scanned as they arrive at each new delivery leg.


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In fact, by the end of March, consumer deliveries rose to 70% of total shipments for UPS, versus 54% in 2019. The issue: UPS makes a lot more profit on B2B deliveries.

In its earnings report, the parcel giant said its trucks were traveling 10% further per stop and making 15% more stops on their daily routes in the face of soaring home deliveries from then locked-down consumers.

Then two weeks ago, we reported that FedEx said the ecommerce surge had led it limit the number of items that about two dozen retailers can ship from certain locations, as the company tried to prevent its network from being overwhelmed during the coronavirus pandemic.

The issue: parcels being shipped to consumers from stores instead of distribution centers.

"These customers have seen significant volume growth since the spread of Covid-19," FedEx said in a notice to its Ground workers reviewed by the Wall Street Journal. "In a time of already high volume growth, capping the number of packages to be picked up at these locations will limit any negative impacts to the FedEx Ground network."

Now still more parcel sector news.

UPS announced it is adding surcharges for shippers starting right now, beginning in June, similar to those it started leveling a few years ago for “peak” season shipments in November and December.

The move is certainly at least in part to get back some of the lost profits from the surge in ecommerce orders noted above and perhaps even nudge some shippers to use other carriers for some of their business.

The surcharge appears to be volume based, calculated relative to the number of parcels a retailer shipped in February versus volumes in June. The fee will apply – for now – just to shippers that topped their average weekly volume in February by more than 25,000 parcels.

The surcharge will be 30 cents per package for UPS Ground and SurePost service, the latter of which involves a partnership with the United States Post Office, under which the USPS does last mile home delivery after UPS gets the parcels close to the final destination. There is also a new $31.45 surcharge on many oversized shipments, which have also surged as consumers order desks, athletic equipment and more as their lifestyles and shopping habits change.


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There is no timetable for ending the new surcharges.

With average revenue per package shipped by UPS to residences at $6.44 in Q1, the 30 cent surcharge would raise shipper costs by just under 5%. Retailers will have to decide whether to just absorb the higher cost, try to pass them off to consumers, or try other means, such as using regional parcel     carriers or encouraging pick-up-in-store options.

For now, FedEx has not announced any domestic surcharges.

USPS Also Struggling with Volumes

With the news out of FedEx and UPS, it should come as no surprise that the USPS, Amazon’s top delivery partner, is also struggling under soaring parcel volumes.

The problems have delayed some package deliveries for days and even weeks, the Wall Street Journal reported.

That is naturally causing major problems for retailers and others using the generally lower priced USPS versus FedEx or UPS, a situation exacerbated by problems with the USPS tracking system.

Reports are that often delivery status on a package is simply not available, or are not scanned as they arrive at each new delivery leg, leaving customers checking on late shipments with no accurate information as to where there parcels are.

According to ShipMatrix, a software provider that analyzes shipping data, the postal service delivered 89.5% of priority mail packages on time between April 19 and May 23, up from 87.4% between March 1 and April 18. For first-class packages, 92.8% were delivered on time between April 19 and May 23, compared with 92.9% in the earlier period.

Times remain very interesting in the parcel shipping sector for carriers, merchants and consumers.

Any reaction to the new UPS surcharges? Let us know your thoughts at the Feedback section below.


 
   

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