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Accessorial Charges

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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%.

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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.

Parcel Shipping Zones

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UPS Trucks

Parcel Shipping Zones

“Zone Shipping” refers to the practice of dividing regions and countries into zones that shipping carriers can then base fee structures on. The farther a package travels relative to its origin, the more zones it must cross, therefore driving up the cost of shipping. By learning a few rules about domestic and international shipping zones, small and mid-sized businesses can learn how and where to take advantage of pricing and enjoy significant savings.

“The better you understand Zone shipping rules, the better you can leverage multiple carriers to keep shipping costs down.”

Domestic Shipping Zones

All major carriers use zones to calculate postage, but rates do vary depending on the carrier and service type. Understanding how zones are priced is an important piece in reducing your total overhead and improving shipment efficiency.

The United States is split into 8 zones, including Alaska, Hawaii and Puerto Rico. Zone 1 would be the closest zone relative to a package’s origin and Zone 8 would be the farthest away. The maps below demonstrate what zones look like for USPS and UPS if, for example, the greater Los Angeles area is the point of origin.

Figure 1: USPS Zone Chart

UPS Zone Chart

Figure 1: USPS Zone Chart 2

UPS-Zone-Chart-2

International Zones from U.S. as Point of Origin

International shipping is similarly broken into zones, or Price Groups. Some countries have their own zones, but most are grouped together based on region. Basic international pricing groups by carrier are shown in the chart below. Note that a higher number or letter does not necessarily correspond to a greater distance from the point of origin.


International-Zones Chart

Know Your Zones

Employing strategic shipping strategies that take zones into account will become increasingly important to the success of any business. United States e-commerce sales reached $396 billion in 2016, and sales are estimated to grow beyond $684 billion by 2020; that’s nearly double the sales in just four years! Over 53 percent of global Internet users made online purchases in 2016—about 1 billion people.  As a result, growing companies that aren’t proficient in shipping could lose thousands, if not millions, of dollars.

“Employing strategic shipping strategies that take zones into account will become increasingly important as e-commerce sales continue to grow.”

The following chart outlines the USPS percent price increase per package as it moves farther away from its point of origin.

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More Ways to Save

With over 50 percent of the United States population living on the coasts, shipping farther distances is inevitable and expensive. If you operate from a single distribution point and ship across multiple zones, there are two ways to reduce costs and improve service levels:

  • Zone Skipping: Zone skipping allows shippers to combine parcel distributions and ship them together to the destination region. Parcel carriers assign rates, in part, based on distance and on how many zones a package travels through. With zone skipping, packages enter the carrier’s system in the final delivery zone, avoiding the high cost of multi-zone moves.
  • Country-wide Shipping: Country-wide shipping focuses on setting up a distribution point that can ship to both coasts by crossing the minimal number of zones in either direction. Alternatively, creating a second point of inventory and distribution creates an opportunity to reduce cost as well as manage business risk; Two distribution centers can provide situational management in the event of electrical outages, major weather events and inventory issues.  Below is an example of a country-wdie zone chart.

Bicoastal Zone image

By choosing a country-wide strategy, your average zone will be lower than if you had one distribution center on either coast, thus lowering the average cost per parcel.

“50 percent of the population in the United States lives on either coast. Get to know your options when it comes to lowering the average zone your parcels are sent to.”

The Takeaway…

The more you understand about parcel shipping, the better prepared you are to meet the shipping demands of your customers. Paying attention to Zone Shipping, and other best practices, will help you maximize efficiency throughout your shipping process while increasing your bottom line.