New Delivery Surcharges by FedEx and UPS Affecting Urban Areas
FedEx and UPS have introduced Delivery Area Surcharges (DAS) in 82 additional ZIP codes across the US, covering nearly 1% of the population. This change particularly affects densely populated urban areas, like San Francisco’s Bay Area. While these surcharges might help offset costs like bridge tolls in these busy regions, there’s speculation that they’re also a strategy for these carriers to boost profits in a time of lower demand.
Both FedEx and UPS insist they review and adjust their DAS to reflect changing market and cost conditions. However, this move presents a challenge for shippers, as it was introduced outside of the carriers' usual annual rate adjustments, making it harder for them to prepare financially.
To mitigate the impact of these new fees, shippers have options. Strategies include consolidating multiple packages to the same address or encouraging customers to pick up at commercial locations where fees are lower. Moreover, there's room for negotiating these surcharges in contracts, especially for businesses with high shipment density and volume. The surcharge price, as per Nicholas Fanelli, Managing Director at Shippingwise, can be “heavily discounted” under such circumstances.
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WHY IS THIS IMPORTANT?
Increased Operating Costs: The surcharges in densely populated areas could significantly increase your operating costs if your business frequently ships to or operates within these zones.
Strategic Planning and Customer Communication: With these changes, it’s essential to revisit your shipping strategies. You might need to communicate these cost changes to your customers or even reconsider your distribution models to maintain profitability.
Negotiation and Contract Management: The fact that surcharges can be negotiated, especially for high-volume shippers, highlights the importance of robust contract management and negotiation skills in your logistics operations.
🔥 OUR HOT TAKE?
These new surcharges signal a shift in the cost structure of shipping and delivery, underscoring the need for flexibility and adaptability in logistics strategies. While they pose challenges, they also present opportunities to innovate in how you manage deliveries, negotiate contracts, and communicate with customers. Embracing these changes proactively can not only help mitigate the immediate financial impacts but also strengthen your business’s resilience in a dynamic market environment.
A recent poll by Siena College reveals that a majority of New Yorkers are not in favor of a proposed $15 congestion toll for entering Midtown Manhattan.