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Making Sense out of Accessorial Charges

 

In the world of shipping, “accessorials” are extra charges that a package may incur in addition to its base rate postage. These added fees might be applied to a laundry list of services, including the handling of hazardous materials or the delivering to remote or sparsely populated areas.

 

Often considered “value-added” service charges, the positive spin on accessorials is that they enable businesses to customize shipments via handpicked add-on services. However, accessorial charges add up quickly if you’re not careful. The trick is to understand how major carriers like FedEx and UPS structure extra fees, avoid these charges wherever possible, and finally budget for the ones that you cannot avoid so that there are no surprises on your bill at the end of the month.

FedEx and UPS identify over 100 accessorial surcharges. The most common items include:

  • Dimensional Weight Pricing
  • Fuel Surcharge
  • Residential Surcharge
  • Delivery Area Surcharge
  • Extended Area Surcharge

 

Predictable Accessorials

Some accessorials are more predictable than others. A package’s dimensional weight factor should be something you know and plan for when determining shipping budgets. Dimensional weight refers to the total volume (Length x Width x Height) a package takes up divided by an assigned dimensional factor.

“A package’s dimensional weight factor should be something you know and plan for when determining shipping budgets.”

For example, let’s examine what a 9” x 9” x 9” 1-pound package would cost with accessorial charges via FedEx.

 

  • (9 x 9 x 9) / 139 dimensional factor = 729 / 139 = 5.24 pounds rounded up to 6 pounds.
  • Actual Weight – 1 pound package, Zone 2 = $7.25
  • Dimensional Weight – 6 pound package, Zone 2 = $10.72
  • 48% increase in shipping cost due to dimensional weight

 

 

What began as a light, 1-pound package quickly ballooned into 6 pounds, thus driving up the shipping cost significantly. This example underscores that considering your dimensional weight accessorial is as important, if not more so, as thinking about the actual weight of your goods.

“The dimensional weight accessorial is as important, if not more so, as thinking about the actual weight of your goods.”

Unpredictable Accessorials

Less predictable accessorials commonly include fuel, residential and delivery area surcharges—particularly if the destination is outside of a metropolitan hub. Price increases can be swift and startling if you are unaware of all the rules surrounding these charges.

Less predictable accessorials commonly include fuel, residential and delivery area surcharges.

A shipment’s cost could easily increase 125% after common accessorials have been factored in. For example, a 1-pound package sent to Zone 4 via FedEx, whose baseline postage is $8.14, could ultimately cost $18.26.

Case Study

Last year, Parcel Partners assessed the shipping habits of a major medical supply company. In the chart below, notice the company was affected by dimensional pricing as well as by fuel accessorials.

 

After careful analysis, Parcel Partners optimized the company’s small parcel shipping by employing a multi-carrier strategy that included FedEx, UPS and USPS. Additionally, Parcel Partners utilized its proprietary “Inverted Dimensional Pricing” to further reduce the medical company’s overall small parcel spend by 15%.

chart2

Recommendations

What can you do about limiting the impact of accessorials? Start by confirming you have selected the correct service options. For example, a residential delivery via FedEx should utilize the carrier’s Home Delivery Service Network (as opposed to Ground Commercial). Considering the 1-pound package example, opting for Home Delivery saved the shipper $.0.45 per package.

“To avoid accessorials, ensure you have selected the correct service options and that your package is labeled with the correct address.”

Also, minimize address errors. Double-check your recipient addresses, as FedEx and UPS may charge up to $14.00 per package in address correction fees—a charge that is typically avoidable.

 

Finally, optimize your shipments by utilizing a multi-carrier shipping platform that includes USPS Priority Mail for your lighter packages. USPS does not have many of the accessorials that FedEx and UPS do, and so by leveraging a multi-carrier strategy, businesses can enjoy significant savings on shipping.

 

USPS accessorials

  • Fuel Surcharge – N/A
  • Dimensional weight Factor – 1728 (much better than FedEx and UPS)
  • Residential Surcharge – N/A
  • Delivery Area Surcharge – N/A
  • Extended Delivery Area Surcharge – N/A

 

Final Advice

Is your head spinning? Carrier accessorial charges are confusing. In fact, they’re meant to be. Invest in the time required to develop a shipping strategy that makes the most sense for your business. Or, leave that part up to the experts. Consider consulting with a supply chain management company that lives and breathes the complex world of shipping—one that can help your business avoid accessorials and ultimately ensure you ship smarter.