Carriers have added surcharges to a number of their services due
to the global pandemic and resultant lack of capacity. In this QAD
Precision Report we look at these charges and how shippers can respond.
The global coronavirus pandemic has impacted many millions of people
around the world. With all but essential stores shut, online sales
have skyrocketed, particularly for items people can use in their
homes, such as DIY tools, electronics and gardening equipment.
Carriers are providing an essential service in keeping supply chains
moving. At the same time, social distancing guidelines can make
processing orders — and getting them to the final customer —
significantly more difficult.
Add to this the fact that with commercial passenger flights all but
grounded, carriers have lost an important air cargo capacity. Under
normal circumstances, around half of all air cargo is carried in the
holds of passenger planes. While a number of major
airlines have transitioned to transporting freight, the capacity
is nowhere near normal levels. In order to cope with the demand and
squeezed capacity, many carriers have added surcharges to their services.
From 1 April, DHL Express added a temporary Emergency
Situation Surcharge to all Time Definite International (TDI)
shipments. It is important to note that the levy does not apply to Day
Definite International (DDI – road) or Time Definite Domestic (TDD)
shipments. Furthermore, DHL Express will not be adding this emergency
surcharge to life science and healthcare customers or any company
using DHL Medical Express (WMX) shipments.
DHL Express noted that these charges reflect the sharp decline in
available commercial air cargo capacity and significant reduction in
the number of destinations. As a result, the carrier has had to fly
via indirect routes and purchase extra cargo aircraft lift, which, the
company states, has increased costs to “ unsustainable levels.”
FedEx has also added Covid-19
surcharges. Like DHL Express, FedEx noted that limited air cargo
capacity has had a significant impact on their operations. From 6
April, FedEx added a temporary surcharge on all FedEx Express and TNT
international parcel and freight shipments.
Similarly, Big Brown has also announced temporary
surcharges. From 5 April, UPS introduced a levy to UPS Worldwide
Express, UPS Worldwide Express Freight, and UPS Expedited shipments
originating in China, including Hong Kong, and destined for North
America and a number of European countries. Furthermore, on 12 April,
the carrier increased the peak surcharge. In addition, this surcharge
now applies to a wider number of ship-from and ship-to origins and
destinations for international shipments. UPS also noted that these
charges may change as the global pandemic situation evolves.
Although surcharges are unwelcome news for shippers, it is worth
noting that as well as dealing with high demand and reduced capacity,
carriers have also been making their networks available to help
governments around the world tackle Covid-19. These are just a few of
a number of projects that carriers are supporting around the world.
During April, FedEx Express will add
150 extra flights between Asia and the US. These flights will
transport critical items such as personal protective equipment (PPE)
and medical supplies. The carrier is also helping the US government to
Covid-19 tests. Similarly, UPS
ramped up operations to expedite the delivery of 3 million
pounds of PPE to US hospitals. Deutsche Post DHL is providing
logistics support in Costa Rica alongside the Costa Rica National
Emergency Commission, while DHL Supply Chain is to deliver a minimum
new ventilators to the UK’s National Health Service (NHS).
Controlling transportation costs is important at any time. At a time
when capacity is tight and surcharges apply, it is even more critical.
Most large enterprises understand the importance of tracking and
auditing freight costs.
Having said that, a number of organizations do not apply the same
rigor to their parcel shipping costs. This is often because parcel
shipments traditionally made up a small percentage of their overall
distribution operations. However, across many industries, parcel
shipments have now become an integral part of their transportation mix.
Expedited shipments are no longer the sole preserve of retailers —
industrial conglomerates, aftermarket parts suppliers, life sciences
companies, high tech manufacturers and others have all seen a
significant increase in the number of parcel shipments that they send
every year. Controlling these costs is critical.
It is worth having a conversation with your customers to see if you
can meet their needs while trimming your reliance on the most
expensive carrier services. If customers who normally require
time-definite delivery are willing to accept day-definite delivery or
wait longer for some shipments, at least temporarily during the
Covid-19 crisis, you should be able to contain some costs.
If you are shipping internationally, avoiding pandemic surcharges
entirely may be impossible. However, consolidation can help you reduce
costs, particularly for international shipments. Using one carrier to
move your consolidated shipment cross-border, and a local carrier for
the final will reduce your total shipping spend, especially on the
A comprehensive multi
carrier software solution will enable you to manage
consolidations in-house. Multi carrier software offers zone-skip
functionality, allowing you to consolidate on the fly. This is very
beneficial in environments when shippers process packages going to the
same destination at different times during the day.
If you ship large volumes of parcels, it makes sense to audit your
invoices. Mistakes happen. Carriers may bill you for a service level
promised, but not received, or may add unexpected accessorials. For
high volume shippers these charges can mount up.
It is, of course, possible to outsource parcel auditing and
reconciliation to a third party. This is relatively straightforward
and frees up staff to concentrate on your core business. On the flip
side, sharing your data with a third party may have risks — not the
least of which is that you don’t have a 360 view of all your shipping
data. By leveraging an in-house solution, you have all your data in
one place — shipping data; invoice data; resolution data; audit
trails; and authorized payments data.
bill audit and payment solution allows companies to easily audit
their parcel shipping spend. It does this by automating the auditing
of all invoices, irrespective of the number of carriers you use, as
well as across all modes, geographic areas, language and currencies.
Freight auditing software will identify discrepancies between expected
freight costs and carrier invoices, alerting you to shipments that
have exceeded predetermined thresholds. You can then evaluate the
conditions that caused the alert, such as a weight variance or an
unexpected accessorial charge.
A further advantage is that freight bill auditing gives you an
analytical, financial review of invoiced carrier costs versus your
supplier agreements. This provides insights into critical shipping
KPIs, giving you a detailed view of your transportation spend and
complete visibility into your logistics operations.
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QAD Precision, a division of QAD Inc., provides industry-leading global
trade compliance, and multi carrier transportation
execution solutions from a single, integrated platform. An
ISO-certified company, QAD Precision assists companies to streamline
and transportation operations, optimize deliveries, and increase
logistics ROI. QAD Precision’s scalable and extensible solution easily
integrates with existing ERP and WMS solutions. Industry leaders in
every region of the world rely on QAD Precision’s global support
centers to leverage thousands of carrier services and manage millions
of global trade and shipping transactions every day. For more
information about QAD Precision, visit www.qadprecision.com.