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Why is shipping so expensive?

May 2, 2019

At the end of each year, FedEx and UPS both announce the general rate increases for the cost of packages being shipped. These increases include the base shipping rate and the majority of the additional value-added services. Small parcel shipping is expensive and small fees can quickly add up to become a huge drain on profits. Therefore, let’s take a look at why shipping is so expensive.

Carrier agreements are complicated

The details of FedEx and UPS agreements can often look like a foreign language even to the experienced of shippers. From value added services and money back guarantees to early termination fees and more, there is a lot to absorb when it comes to reviewing, understanding and ultimately feeling confident about the terms of a carrier agreement.
Carrier agreements are divided by express, ground and freight pricing. Each of these is further divided into base and earned discount categories. In addition, each service will have possible discounts for fuel surcharge and value added service fees.

Value Added Services

Value-added services or accessorial fees will account for a large percentage of a company’s shipping costs. FedEx and UPS do not make identification or quantification of these fees easy. This where data and reporting from a trusted 3rd party is invaluable. How many residential fees, delivery area surcharges, and address correction fees have been applied to your invoices in the past 6 months?

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