Slash Unnecessary Parcel Shipping Surcharges with Parcel Orchestration
Parcel shipping is a business necessity in today's world of booming e-commerce – it is a business necessity. However, recent trends have raised alarm bells within the shipping industry. The annual Pitney Bowes Parcel Shipping Index showed an unsettling pattern: despite a 2% decrease in U.S. parcel volumes in 2022, carriers' revenues saw an upswing of 6.5% from the previous year. What's driving this unexpected revenue growth, you might wonder? It's largely due to silent predators lurking beneath the surface of your shipping invoices: shipping surcharges and accessorial fees.
These carrier surcharges, often glossed over, have been quietly escalating, dramatically pushing up shipping costs far beyond the rate of inflation. If not monitored carefully, these avoidable parcel shipping surcharges can lead to severe spend leakage and pose a significant threat to your company's bottom line.
Understanding these charges and the benefits of intelligent parcel management software can empower businesses to regain control over their shipping expenses. This article aims to shed light on avoidable surcharges and how parcel orchestration technology can help shippers reduce them to keep their parcel budgets in line.
The Problem with Parcel Shipping Surcharges
Unseen and often misunderstood, the real issue with parcel shipping surcharges is the difficulty shippers face in pinpointing when, where, and how these additional charges might be levied. While many businesses have some understanding of basic carrier rating, particularly as they make decisions within shopping carts, order management, and fulfillment processes, the burgeoning number of carrier surcharges has added considerable complexity. It's like trying to navigate a labyrinth with ever-changing walls – just as you think you've got a handle on the charges, new ones appear, disrupting your cost calculations.
The fallout from this complexity is a widening gap between what shippers expect to pay and the actual costs reflected in carrier invoices, leading to significant financial control problems. Imagine a product engineer attempting to determine margins without knowing the costs of raw materials—it's a shaky financial strategy at best. Similarly, logistics managers need to have precise knowledge of transportation costs to prevent margin erosion. The aim is not to eliminate all surcharges, as some are essential and reflect necessary special services. However, by improving parcel spend management controls, it is possible to at least anticipate surcharges and take steps to minimize and even eliminate them. Costs should never come as a surprise to fiscally responsible organizations.
Avoidable Parcel Shipping Surcharges and Fees
Parcel surcharges are a multifaceted issue that can complicate cost planning and management. However, understanding the types of surcharges and implementing targeted solutions can help shippers manage shipping expenses more effectively.
Address Correction Surcharges
Address correction surcharges occur when the address indicated on a parcel differs from what the carrier’s internal system thinks it should be. For standard package services, these charges can reach as high as $21.00 per correction and can even surpass $100 per correction for express and expedited services. Worse, shippers may be hit with recurring address corrections for the same delivery address. Though often overlooked on carrier invoices, these charges are surprisingly common. To mitigate these, intelligent parcel solutions should utilize a carrier's proprietary address validation APIs as a “source of truth,” ensuring addresses each carrier believes are correct are always on shipping labels.
Residential Surcharges
Residential surcharges also add additional costs when deliveries are made to non-commercial locations, potentially reaching up to $5.80 for ground deliveries. These charges should be factored into the true landed costs of delivery before shipping. A successful mitigation strategy involves using a carrier’s API to accurately identify residential status, enabling shippers to anticipate and budget for residential costs, thereby reducing the gap between expected vs. actual costs.
Dimensional Weight Adjustments
Shipping charges are often calculated by carriers based on the dimensional (DIM) weight, aiming to maximize their vehicles' cubic space utilization. Poor packing processes are often the culprit. Employing intelligent cartonization algorithms can help shippers automatically determine the most transportation cost-effective packing methods, to minimize wasted space and associated DIM charges.
Oversize Adjustments
Oversize charges come into play when a package exceeds the carrier's specified weight or size limits, with surcharges varying between $95 - $135 per package, depending on the carrier. To avoid these charges, companies should consider splitting larger shipments whenever possible or incorporating the surcharges into the final landed costs when shipping a singular large item. Intelligent parcel management solutions can further minimize these charges by embedding rules that disqualify carriers from selection when shipments exceed dimension parameters.
Peak Pickup Limit Excess
During peak periods, carriers may set daily pickup limits on the number of shipments they pick up in a single day. If a shipper crosses this limit, they may face pickup limit surcharges. By monitoring shipment volumes for each carrier in real-time and adhering to carrier contract rules, shippers can reroute to an alternate carrier service once the pickup limit is hit, avoiding unexpected pickup surcharges on subsequent carrier invoices.
Missed Contract Incentive Targets
Shippers who have tier incentives in their primary carrier contracts, offering discounts for reaching specific parcel shipment spend targets, stand to lose these benefits if the targets aren't met. This could result in significant and unforeseen shipping costs. Solutions should focus on monitoring daily pickup volumes and making carrier routing decisions that avoid surcharges, while also maintaining incentive target run rates. Ensuring that no other carrier’s services are selected until the incentive tier is reached is critical, even if another carrier may be less expensive in the short term.
Harnessing Parcel Orchestration: The Power to Anticipate and Manage Surcharges
Parcel shipping is a complex business with a variety of potential surcharges that can substantially impact cost structures. For logistics managers, understanding and navigating these charges is vital, but having the power to anticipate and manage these costs is the key to operational efficiency and financial control.
Intelligent parcel orchestration platforms, like Sendflex, give you that power. By applying smart business rules, our platform reduces guesswork and brings precision to decision-making processes. With features like location intelligence, smart cartonization, and contract compliance, we offer comprehensive solutions to mitigate avoidable surcharges. It's not just about reacting to costs as they arise; it's about proactive management and taking the lead in your company's shipping cost strategy.
So, don't just watch your shipping costs unfold. Request a consultation with our parcel experts today and get the tools you need to optimize your parcel operations.
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