In late May, UPS announced that it was adding a Shipping Charge Correction Audit Fee whenever the average shipping charge correction during an invoice week is greater than $5 per package. A lot was written about the implication on shippers and almost all of it focused on how the charge might be applied, but without projecting its impact on them.
The common assumption was that the $5 threshold was high enough that the Shipping Charge Correction Audit Fee – which is the greater of either $1 per package or 6% of the total amount of corrections – would affect a relatively small segment of UPS shippers when it went into effect June 4.
Problem is, those assumptions underestimate how many packages are caught up by operational inefficiencies – inaccurate dimensioning, treating residential packages as commercial, repeated address corrections, and other controllable factors – that aren’t always evident without the visibility provided by parcel intelligence tools like the VeriShip Intelligence Platform (VIP).
If UPS’ goal is to continue to optimize its networks, then this is a big enough – and costly enough – problem that the carrier wants to punish chronic offenders so they self-correct. Remember, the minimum penalty is 6%, but the ceiling could be much higher.
Companies are seeing an average effective penalty of about 11% — and as high as 20%.
Now, with most UPS shippers a few invoice cycles into this new normal, the actual impact has come into focus.
For nearly 54% of businesses, the results aren’t pretty.
A detailed and holistic review of more than 2,000 UPS customers through VeriShip Intelligence Platform analytics shows that more than 54% of those businesses are being dinged by the new Audit Fee as they exceed that $5-per-package average.
Through the first five invoices following the fee’s implementation, companies are seeing an average effective penalty of about 11% — and as high as 20% — as more than $220,400 in fees have been charged on 204,197 packages amounting to $1,977,428 in correction totals.
What You Can Do
As the fee is just weeks old, now’s a great time to get ahead of your Shipping Charge Corrections.
The good news is that these corrections often are within your control.
(One example: When it comes to dimensioning, the carrier always rounds up. Even small mis-calibration within your systems can cost you unless you’ve negotiated a variance.)
This penalty might be the inspiration you need to refocus on operational efficiency. It’s another demonstration for why parcel intelligence visibility is so valuable, especially down to the account or location levels where these corrections sometimes fly below the radar. If you’re lacking access to that visibility, you’re playing from behind.
We at VeriShip are here to help. Contact us and we’ll get started ASAP.
Stephen Rolf is a Senior Solutions Engineer at VeriShip.