For most shippers, 2024 was a mixed bag. On the one hand, shipping costs continued to increase, something we saw right out of the gate with FedEx and United Parcel Service (UPS) instituting general rate increases (GRIs) of 5.9% for 2024. At the time, this represented a compounded increase of 20% over three years, but in reality, most companies saw significantly higher increases once they factored in the new rules, fees, and surcharges not included on either carriers’ rate card. Now we are looking at another 5.9% GRI from both in 2025.
On the other hand, all carriers were more eager to gain market share – a fact that led most to grant significant concessions to shippers who effectively pursued discounts and exceptions. In many ways it was a buyers’ market, with those who included a strong business case with their requests seeing far more advantageous outcomes from their carrier partners than in recent years.
Even in this market, though, shippers continued to needlessly fall victim to a litany of extra charges as a result of failures within parcel shipping operations and the enterprises they serve. While it is imperative that every organization look closely at its unique shipping profile to identify organization-specific opportunities to generate savings and close cash leaks, these extra charges are needless, common expenditures that are directly applicable to nearly every business.
Just as importantly, they can be proactively avoided with the actionable insights and alerts shippers now have access to – a reality that only serves to make these “gotchas” all the more noteworthy. Following are some of these pitfalls that needlessly encumbered shippers in 2024.
● Unclaimed Rebates: While not the most impactful loss, the fact that money owed to shippers based on carriers’ failures to meet their own service level guarantees – typically because a package is delivered late – puts unclaimed rebates in its own class among the “gotchas” shippers fall victim to. In our analysis, we have found that more than 75% of shippers relying on traditional audits do not request the rebates they are entitled to contractually. While varying from one business to another, these unclaimed rebates are literally money left on the table, a distinction that puts them in a category of their own.
● Unneeded Early A.M. Deliveries: When an urgently needed part is required to keep operations on the factory floor up and running or when a patient is in urgent need of medication, early a.m. deliveries are clearly necessary and valuable. Unfortunately, the decision to send packages out for one-day, early a.m. delivery continues to be frequently made without insight into whether they are necessary or their dramatic impact on costs.
In our analysis of more than 30,000 shipments shipped for one-day, early a.m. delivery in 2024, the average weight in our sample size was 9.5 pounds, with the average cost-per-shipment being $142.28 – a reflection of the fact that many shippers do not have discounts in place for this premium service. In contrast, a parcel weighing 9.5 pounds shipped via 1-Day Priority averaged out to an average shipping cost of $20.14. In most cases, that equates to a 700% increase in cost between a shipment that is guaranteed to arrive at 8:30 a.m. and one that is guaranteed to arrive at 10:30 a.m. Clearly, a two-hour time difference was not consequential in all of those shipments.
● Address Corrections: In any parcel shipping operation, it is important to know and monitor the average cost-per-package. This is particularly true when in comes to charges that occur after a package is shipped, but which can dramatically impact shipping costs, and in e-commerce operations, where even a small change can result in a transaction that results in a loss in the face of what are often very tight sales margins.
Address corrections are a particularly insidious example. In 2024, shippers who experienced an address correction saw their average shipping costs increase by 40% over their shipments that did not require a correction – a $14.28 difference in the sample we analyzed. Regrettably, to add insult to injury, shippers who incur address correction fees all too often do not automatically isolate and scrub the addresses involved, something which often makes this “gotcha” a repeat offender.
● Late Fees: In a time when the cost of capital is a top-of-mind issue among senior executive leaders across industries, the very notion of late fees is cause for concern. Fortunately, fees associated with late payments to carriers are 100% avoidable with shipping intelligence that alerts shippers and enables them to present accurate billing reports faster than ever before. Despite this, on our platform alone, shippers incurred $7,626,800 in late payment fees just for FedEx and UPS alone – most often because accounts payable departments failed to tender payment within established deadlines.
● Chargebacks: Like late fees, chargebacks completely upend the economics associated with any shipment. This clearly makes sense – carriers should not have to absorb payment failures they clearly have no control over, something the 2024 UPS Service Guide puts in clear focus: “In the event of non-payment by the consignee or third party, the original shipper will be billed a refusal fee in addition to the shipping charges.”
In other words, if the shipment is billed to a third party and they refuse or fail to pay for it, the shipper is responsible for it and a rebill penalty – again an understandable extra charge. In 2024, in a sample taken from our platform, UPS alone levied nearly $600,000 in chargeback fees and nearly $977,000 in associated fees to shippers.
These “gotchas” are of course only some of the many reasons that parcel shippers lost money in 2024. Longstanding culprits, among them oversize and overweight charges, surcharges that were unexpected either because shippers were unaware of them – the new Delivery Area Surcharges (DAS) applied to largely metropolitan areas in 2024 for the first time are an example – or failed to account for them when negotiated discounts expired before the end of the contract, were also common causes of lost revenue.
Just as importantly, even the most sophisticated shipping organizations fell victim to “gotchas,” such as when sophisticated multi-carrier operations failed to meet contractual agreements, such as when they optimized their interactions with one carrier and failed to factor in the subsequent impact on volume minimums and earned discounts with others. Fortunately, however, all of these “gotchas” can be prevented and avoided with the proactive action shippers are now able to make – a reality that promises real gains in the year to come.
Josh Dunham is the co-founder and CEO of Reveel. Founded to help shippers level the playing field for carriers, Reveel’s Shipping Intelligence Platform uses Parcel Spend Management 2.0 technology to provide parcel shippers with the actionable insights they need to lower their shipping costs right now, and an Analytics Hub that enables them to drill down into even the most complex shipping data.
This article originally appeared in the November/December, 2024 issue of PARCEL.
