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.
Carrier Pandemic Surcharges Explained
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.
Carriers Assist in the Global Fight Against Covid-19
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 transport 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 of 10,000 new ventilators to the UK’s National Health Service (NHS).
Managing Parcel Shipping Costs During a Pandemic
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 international leg.
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.
A freight 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. The 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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About Precision – Trusted Global Trade and Transportation Execution
Precision 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 their import, export 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.