No doubt experienced shippers have come to expect annual carrier rate increases, but this year’s influx of surcharges has revealed just how dependent a supply chain can be on its carriers, especially the giants we all know. So, this year’s shocking rate hikes have encouraged quite a few retailers to reexamine their current delivery solutions.
While it’s normal for large name national carriers to have moderate annual rate increases, the 2020 global pandemic has radically increased surcharges across the board. Back in April, two of the biggest global carriers implemented domestic surcharges at short notice, all of which targeted their large volume shippers who are seeing an increase in residential deliveries and last mile shipping. In fact, there are pages upon pages detailing these increases and other changes that may affect a shipper’s rate on their websites.
On its face, these surcharges seem significant, but not unmanageable for shippers. However, when you examine the competitors’ announcements regarding their company’s average rate increases carefully, you find that it’s never as simple and transparent as the carriers would have you believe. In fact, very few companies (if any) will fall into this average. For many, these increased shipping costs alone may push brick-and-mortar retailers (many of whom have already been hammered by the pains of the pandemic) out of profitability.
Another scary thought to consider: just six months ago, customers who had contracts with either party within this duopoly had no way of knowing their agreed-upon rates would increase as dramatically as they have thanks to COVID-19. And since there is no governing body that can truly regulate these surcharges, shippers appear to be at the mercy of their parcel carrier partners--who have already reported record profits for 2020!
One way retailers and ecommerce businesses might be able to alleviate this continuing pressure from parcel carriers is to look into competitive rates with regional carriers and 3PLs to optimize their shipping costs both now and in the future. While it may not make sense to move your entire business to a new carrier (at least now), there may be areas that are better suited for other logistics providers to step in and help. But to see whether this makes sense for your business, there are a few things you will need to do to ensure it’s the best option to benefit for your bottom line:
- First, because any given company’s makeup of their freight packages can be fundamentally different from the next company’s, it’s crucial to do a package level detail assessment to really determine what your carriers’ rate increases mean for your particular organization.---
- Next, evaluate how all these additional surcharges – fuel, additional handling, residential, peak surcharges, and more – are going to affect your business’ bottom line.
- Take a close look at your shipment level details and uncover where you can optimize your shipping strategy by diversifying your parcel carrier options.-
- Understand your organization’s entire profile and how much profit it generates for your parcel carrier partners. This will give you the grounds necessary to negotiate the best rates possible in certain areas.
In the end, you should have a thorough understanding of your annual base rates and how they compare year over year. That alone is the only way to know what the true percentage rate increase looks like for your business each year, which will guide you in developing strong partnerships with regional carriers and 3PLs who can optimize your last-mile delivery solutions.
GEODIS | City Delivery connects you with supply chain experts who can help to optimize your logistics solutions and meet complex delivery needs. With over a century of global experience in last mile delivery and logistics, GEODIS | City Delivery can help you to find profitability in even the busiest of peak seasons.
Visit our website to get in contact with our experts: GEODIS | SCO - City Delivery
This blog post was edited by Ana Rosa Arana - firstname.lastname@example.org