Benjamin Franklin is often credited with coining the phrase, "A penny saved is a penny earned.” While it may have lost some of its meaning over the years, as we often dismiss the effect of pennies on our budgets, it is increasingly important during times of thin margins, slowing sales, and increased competition to pay close attention to those pennies which quickly turn into hundreds of thousands or millions of dollars.
THE STUDY
We recently prepared a study of the zip codes added to delivery area surcharges by FedEx and UPS made in April this year. On the surface, it may seem minor - only about 80 new zip codes added, but it affects nearly 3 million people. These newly added areas are in and around New York City, Los Angeles, Atlanta, Chattanooga, and San Francisco. When added to the areas already subject to surcharges, approximately 75% of all zip codes in the USA are covered by some form of location surcharge.
AREA SURCHARGE-AFFECTED LOCATIONS
At Freight Think, we wanted to understand how these changes affect our clients’ profitability. We learned some interesting things:
Over the past five years, the undiscounted surcharges have increased between 27% and 43% for the Commercial and Residential Ground Services for both UPS and FedEx.
Since these charges have increased more quickly than inflation, a client with a 50% discount on DAS charges in 2020, would need a 60% discount today just to keep the increases in line with inflation.
The number of people living in zip codes affected by delivery area surcharges is nearly 1/3 of the entire population, or approximately 100 million.
WHAT CAN YOU DO?
When we work with organizations to reduce their transportation costs, we start with controllable expenses in areas where change can be quickly implemented.
The parcel carriers are interested in keeping your business, and frequently claim the “large” discounts they are offering, but they can be very “creative” and often find ways to increase their margins that are not readily apparent. You need to ensure that the carriers continue to EARN your business by making it clear that you are willing to consider alternative providers.
Review your criteria for selecting service levels. Lower cost ground service often have the exact same transit time as higher priced ‘express” option.
Reduce theft, signature fees, and residential surcharges by partnering with final mile services.
We have many more practical solutions to combat rising costs and save not pennies, but DOLLARS, on each package you ship.
Let’s talk today about your business and how we can support your goals.
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