In this episode of Parcel Perspectives, host Glenn Gooding tackles the complex topic of fuel surcharges in the small parcel shipping market. He begins by explaining why shippers might experience cost increases even after careful planning for general rate increases (GRIs). Glenn breaks down fuel surcharges into three main aspects: their definition and purpose, their impact on logistics budgets, and strategies to mitigate or negotiate these expenses effectively.
Glenn provides a detailed analysis of how carriers like UPS calculate fuel surcharges using Department of Energy fuel price indexes and adjust these surcharges weekly. He highlights historical trends to show how carriers subtly increase surcharges over time, likening it to the analogy of "boiling a frog"—where incremental changes can go unnoticed. An illustrative example is given to demonstrate the financial impact on shippers, emphasizing that the cost of shipping a typical parcel has significantly increased due to fuel surcharge adjustments over the past few years.
Wrapping up, Glenn discusses negotiation tactics for shippers to handle fuel surcharges better. He stresses the importance of a holistic approach in carrier negotiations, cautioning against focusing solely on one aspect like fuel surcharges while neglecting others such as accessorial fees. Glenn's extensive experience in the industry validates his insights and strategies, as he has worked with a diverse range of clients, from Fortune 50 companies to startup e-commerce businesses, guiding them through the intricacies of the small parcel shipping market.
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