skip to main content
DELIVER DIRECT - Peak seasons surcharge a blow to shippers' bottom line.
Peak seasons surcharge a blow to shippers
  November 15, 2023 Chris Grey, Vice President of Business Development at SmartKargo

Peak seasons surcharge a blow to shippers' bottom line.

In the world of shipping and logistics, the peak season surcharge is a term that raises eyebrows, as well as costs. This surcharge, much like other additional fees imposed by well-established delivery companies, has a significant impact on the bottom line for shippers. Let’s dive deeper into what this means, why it exists, and the implications it has on businesses.

Peak season surcharge (PSS) is an additional fee levied by shipping companies during their busiest times of the year. The concept behind this is relatively simple: When demand is high, resources are stretched thin. This means there's an increased need for staff, equipment, and other resources to manage the influx of shipments. To offset these costs and to capitalize on the increased demand, carriers introduce a surcharge. In a recent article in Supply Chain Dive, the industry is really in two camps when it comes to PSS: the larger, established carriers are continuing to implement a PSS charge while more innovative, alternative carriers are choosing not to charge PSS.

If you’ve ever shipped a package and been surprised by the final cost, you're not alone. Status quo delivery companies have a long list of surcharges. These may include residential surcharges, and oversized package fees, among others. These fees are introduced to cover specific costs or challenges faced by the carrier, or to deter certain shipping behaviors that might strain the system and be costly to the delivery company.

If you’ve ever shipped a package and been surprised by the final cost, you're not alone. Status quo delivery companies have a long list of surcharges. These may include residential surcharges, and oversized package fees, among others. These fees are introduced to cover specific costs or challenges faced by the carrier, or to deter certain shipping behaviors that might strain the system and be costly to the delivery company.

This increases the shippers bottom-line in many ways:

  • The most immediate impact is, of course, the increased shipping costs. Especially for businesses that rely heavily on shipping during peak periods, including e-commerce platforms during the holiday season, this can significantly dent their profit margins.
  • There are operational challenges and planning becomes critical, and so do alternatives. Shippers must forecast their shipping needs accurately to avoid unnecessary costs. They might also be tempted to expedite shipments before the surcharge kicks in or delay until after, leading to potential inventory and supply chain challenges. More innovative carriers that offer alternative solutions, and do not charge PSS allow room for more flexibility.
  • The frustration surcharges can cause might push businesses to explore alternative carriers or shipping methods. While diversifying carriers can be a strategic move, it also introduces complexity in terms of managing relationships, understanding different fee structures, and ensuring consistent service quality.

In Conclusion

Peak season surcharges, while understood from a logistical perspective, are a thorn in the side of many businesses. They exemplify the myriad of hidden costs in the shipping industry that can quickly erode profits. As with all business challenges, the key lies in understanding, planning, and strategizing. Shippers must remain aware of these surcharges, factor them into their pricing models, optimize operations, and look for inventive alternatives to navigate the peak seasons effectively. And as consumers become savvier, transparency in shipping costs will also play a vital role in maintaining trust and loyalty.

The opinions expressed by the author are solely their opinions do not necessarily reflect the opinions of Delta or any of its affiliates, subsidiaries or any of their respective directors, officers, employees, agents, or representatives. The opinions expressed are based upon information the author considers reliable, but neither Delta nor its affiliates warrant its completeness or accuracy, and it should not be relied upon as such.