UPS Hikes Rates for Higher Volume and Large Package Shippers During COVID-19
UPS announced two Peak Surcharge increases effective May 31, 2020: an increase on UPS Ground Residential and UPS SurePost packages, as well as an add-on charge for larger shipments that incur the Large Package Surcharge (LPS).
Ground Residential as well as SurePost will be assessed an additional surcharge of $.30/package when the current average weekly volume compared to the weekly average during the month of February 2020 (the “Initial Threshold”) exceeds 25,000 packages. Once the Initial Threshold has been met, the Peak Surcharge applies until further notice to all UPS Ground Residential and UPS SurePost packages in any week exceeding 110 percent of the customer’s average weekly volume from Feb. 2, 2020 through Feb. 29, 2020 during the applicable weekly invoice period.
Here's how the Peak Surcharge will be applied. UPS will measure volume by combining Ground Residential and SurePost packages in the month of February 2020 to create a weekly baseline. Ten percent will be added to the baseline. See below for an example:
- Average February weekly volume = 20,000
- 20,000 * 1.10 = 22,000 is the baseline
Each week going forward is compared to this baseline. Going back to the example above, if any week exceeds 22,000 plus 25,000 (47,000), then the new Peak Surcharge will be applied to all Ground Residential and SurePost shipments for that week.
In addition, UPS is imposing a $31.45 peak surcharge to LPS when more than 500 LPS charges are assessed/week. Per the UPS Service Guide, Large Packages are defined as packages with length (longest side of the package) plus girth [(2 x width) + (2 x height)] combined exceeding 130 inches, or with length exceeding 96 inches.
Details on the new surcharges can be found on the UPS website.
It's important to note that these added costs will be applied to ALL shipments, not just those packages above the overage thresholds. Think about the impact in numbers even for modest volume shippers:
- $.30 increase applies to Ground Residential and SurePost:
- Normal February 2020 average weekly volumes = 200,000 Ground Residential or SurePost packages
- Current weekly volumes = 350,000 packages
- Cost impact = $105,000 incremental per week
- $31.45 additional charges applies to all packages that incur a LPS:
- 1,000 LPS charges/week = $31,450 incremental per week
- 5,000 LPS charges/week = $157,250 incremental per week
- 10,000 LPS charges/week = $314,500 incremental per week
Note, even if a company has a contract concession on a surcharge (like say 50 percent off Large Package Surcharge), it won’t necessarily and automatically apply here as this is being a called a peak surcharge, not LPS. The shipper would have to negotiate a peak surcharge concession specific to the increase (e.g., “peak surcharge – LPS”).
Shipware expects FedEx to follow suit shortly.
Shipware’s in the process of analyzing the financial impact to our $1 billion client base, but obviously the new peak surcharges are going to impact high-volume e-commerce shippers that have increased deliveries during COVID, especially brand names.
Shipware is conducting a free assessment for those shippers that want to better understand the financial impact of these changes to their business. As always, shippers that need help are invited to contact me at email@example.com. Good luck!
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.