UPS rolls out new peak shipping surcharge

During certain weeks in November and December this year, shippers and consumers need to prepare to pay a little more for deliveries handled by UPS in the form of a new peak shipping charge, which the company rolled out earlier today.

This charge will be geared towards U.S. residential, large packages along with packages over maximum limits, with the company explaining it will allow it to continue to focus on its best-in-class customer value as well as offset some additional expenses that are incurred during periods of heavy volumes.

And UPS added that during the holiday peak it needs to temporarily acquire additional air and truck cargo capacity, temporary facilities, and additional sorting and delivery personnel at short-term premium rates, adding that large and heavy shipments, as well as those with unconventional shapes or size often pose operational challenges during peak periods.

“We’re focused on helping our customers achieve success during some of their most important selling seasons,” said Alan Gershenhorn, UPS Chief Commercial Officer, in a statement. “To meet their requirements, UPS flexes its delivery network to process near double our already massive regular daily volume, and that creates exceptional demands. Our goal is to help every customer obtain the delivery capacity they need, combined with predictable and timely service they count on from UPS, even when there is limited capacity in the UPS network.”

For ground residential rates, UPS’s per-piece peak charge, for the 48 contiguous states and intrastate Alaska and Hawaii, will be $0.27 for the weeks of November 19-25, November 26-Decemnber 2, and December 17-23. There will be an $0.81 charge for UPS Next Day Air Delivery from December 17-23, a $0.97 charge for UPS 2nd Day Air Residential from December 17-23, a $0.97 charge for 3 Day Select Residential from December 17-23, and a $0.27 charge for Ground Residential for the same week.

Putting these changes into perspective, UPS said that a five-pound UPS Next Day Air package shipped from Atlanta, GA to a residential address in Philadelphia, PA will increase about one percent, compared to non-peak shipping times. And it added that a similar package shipped to a commercial address would experience no additional costs.

Shippers may want to think twice about larger packages during the holiday season, too, with UPS saying that from November 19-December 23, it will apply peak surcharges to large packages and also packages that exceed maximum size limits, with these charges in addition to normal surcharges applicable to such packages.

“When shipping packages that exceed UPS’s published maximum size limits, customers are encouraged to consider using UPS Freight,” the company said. 

UPS said a Peak Surcharge will be published on September 1 in a revised version of its UPS U.S. Rate & Service Guide, and it added that it plans on applying a peak surcharge on specific international air shipping lanes over certain parts of the year.

In offering up some perspective on how many shipments the peak surcharges will impact, UPS turned to its 2016 peak/holiday season data, which included how:

• during the 2016 holiday season, the company’s average daily volume exceeded 30 million packages on more than half of the available shipping compared to an average non-peak day, when it ships more than 19 million packages;
• UPS hired roughly 95,000 seasonal employees during the 2016 peak shipping period;
• for all of 2016, UPS shipped nearly 5 billion packages, with almost 3 million packages and documents shipped daily by the company’s airline; and
• almost 3% of global GDP and 6% of U.S. GDP flows through the UPS network every day

While this is one way to address the additional costs associated with the holiday shipping period,” Jerry Hempstead, president of Hempstead Consulting, told LM that the he sad reality is that this additional charge, as worded, penalizes all shippers regardless of their shipping pattern or if they are in any way involved in the additional costs incurred by UPS during peak.

“The fee is focused on residential, but some residential like prescription drugs from Humana or Express Scripts or CVS are not seasonally related yet will be forced to shoulder costs incurred by firms like Amazon and Walmart.com,” he said. “I can see some push back by non-seasonal shippers, and like everything in life the fee is negotiable and since it's new some firms will negotiate an exemption (for a period of time). My gut says FedEx will like this new charge and mirror it in some way, at least in the service guide.”