Peak season surcharges are additional fees added to base shipping fares during periods of high demand. The idea behind the surcharges is to compensate for stretched capacity and strained operations. Stakeholders also see them as an opportunity to earn extra income from increased demands.
When Do Peak Season Surcharges Occur? Peak season surcharges are extra fees added during periods of high demand in the shipping sector. These are periods when retailers sell more and import more goods to meet increasing customer demands. Typically, these peak buying periods occur during:
The holiday season (usually end of the year towards Christmas and New Year) Back to school season Thanksgiving period, especially during Black Friday and Cyber Monday Specific industry-related peak season As a rule of thumb, businesses often aim to stock their inventories at least a month in advance, making surcharges a common feature during that period. Sometimes, peak season-related activities occur outside the above periods -- for example, during an election, geopolitical crisis, or natural disasters like earthquakes and the pandemic. Consumers stock up during these periods to have a buffer of essential products, as a just-in-case strategy.Â
Peak season-sque situations lead to surcharges as logistics providers take advantage of the tight capacity availability to offer space at a premium.
Who Applies The Peak Season Surcharges? Relevant logistics providers apply peak season surcharges in the shipping industry. And these are more than just the carriers or owners of the vessels. Here are possible players that can impact peak season surcharges:
Freight forwarders Fulfillment providers, such as warehouse owners Carriers (including air, ocean, trucking, and rail) Terminal operators, because of the increased workload Drayage and chassis providers Peak season surcharges are not always limited to one entity. Anyone involved in the transportation process and impacted by the increased operational costs and capacity constraints that come with increased demands can add extra fares to manage or balance the entire situation.
Peak Season Surcharge (PSS) vs General Rate Increase (GRI) The peak season surcharge and general rate increase are adjustment techniques, but they are used differently and in varying circumstances. While the peak season surcharge is a temporal tool carriers and other transporting stakeholders leverage to manage periods of high demand, the general rate increase is more of a permanent solution used occasionally. As the name suggests, it is used to drive up shipping rates.
**Factors**
**Peak Season Surcharge (PSS)**
**General Rate Increase (GRI)**
Nature of Increase
Temporary or seasonal
Permanent
Reason for Increase
High demand and capacity constraints during peak seasons
Rising operational costs (fuel, labor, etc.)
Timing
Applied typically during extended periods of high demands
It can be applied anytime, not tied to any particular period
Applied by
Carriers, freight forwarders, other service providers
Primarily ocean carriers, sometimes airfreight carriers
Impact
Base rates are the same, but overall shipping costs can be increased significantly
Impacts base shipping rates and all shipments
Why Do Carriers Create Peak Season Surcharges Outside of Usual Peaks? While Peak Season Surcharges (PSS) typically occur during well-known peak seasons, such as the holiday season or back-to-school periods, there are also other times or situations when increased surcharges might be applied, similar to those seen during peak shipping operations. These situations could arise unexpectedly or due to specific industry demands, impacting even the average retailer. Some of these reasons are:
1. Unexpected Demand Surcharges There are times throughout the year when demand for specific products spikes due to black swan events — unpredictable occurrences that can disrupt normal market conditions. For instance, the trade tariff war between the U.S. and China led businesses to stock up on essential items in anticipation of tariffs taking effect, driving up demand unexpectedly. These sudden surges are often driven by new trends or unforeseen circumstances, making them difficult to predict.
2. Increased Operational Costs When operational costs — such as fuel and labor costs — increase, shipping stakeholders tend to pass this on to the shippers or customers. A typical example is the current Red Sea crisis, which has seen carriers take alternate shipping routes around the Horn of Africa, charging more to cover rising insurance and fuel consumption on the longer routes.
3. Capacity Constraints Sometimes, when there aren’t enough carriers to transport the goods, the ones available tend to increase rates to limit or manage the capacity constraints, especially because their infrastructure and resources will have to work around the clock to meet those demands.
4. Market Dynamics The market plays a significant role in peak season surcharges. Even if only major carriers, terminal operators, or other stakeholders are increasing surcharges or spot rates to manage demand, smaller carriers will likely follow suit as long as they continue attracting customers. At that point, the entire market might follow suit, leading to a wide implementation of PSS.
Strategies for Shippers To Minimize Peak Season Surcharges Undoubtedly, peak season surcharges can impact shippers and their ability to navigate the shipping industry effectively without a huge financial burden. However, there are a few ways to avoid this with minimal impact on shipping schedules and finances.
1. Consolidate Packages During peak periods, it pays to maximize each container space as much as possible without damaging the goods themselves. For instance, six containers can be used to transport products that can be safely fitted into four containers. The surcharges are attributed to each container, not the product, and reducing the number of containers can significantly help reduce the cost of the shipping operation.
2. Negotiate Discounts on Peak Season Charges As with most aspects of commerce, large volumes can be a friend. When a shipper is transporting products via a significant number of containers, the shipper can negotiate the PSS with carriers for discounts. Major retailers like Walmart, Amazon, and Costco do this to reduce the financial burden of the shipping operation.
3. Leverage Contracts When negotiating contracts with carriers, it is essential to ensure there is a cap on how much they can charge extra during peak seasons. This is helpful because PSS rates can get out of hand, and the shipper can be protected during these periods because of the cap, saving them a ton of capital or financial resources.
4. Diversification of Shipping Modes Shippers can leverage intermodal shipping options such as rail, trucking, or air freight for long distances. Shippers can get the most out of these modes by diversifying shipping modes. For instance, rail is less expensive than trucking, and ocean freight is less expensive than rail. However, the distance matters a great deal, and the area of transportation also plays a significant role.Â
5. Partner With Freight Forwarders Freight forwarders are stakeholders connecting shippers with transportation service providers. The freight forwarders help the shippers negotiate better rates with carriers, find the best strategies for managing intermodal transportation, and procure contract rates. Another key significance of the freight forwarders is shipment consolidation.
Through shipment consolidation, the freight forwarder can combine shipments into one container or connect shippers with others so they can put their products in one container if neither is enough to fill the entire container space. This shared container load strategy allows them to reduce each shipper’s financial burden.Â
However, certain conditions guide these consolidation processes. For instance, shipments of the same category must be assembled to prevent issues. Safety practices like securement and proper space utilization must then be followed. The freight forwarders are well-equipped to handle all of these.
Future of Peak Season Surcharges As international trade becomes increasingly complicated, peak season surcharges are expected to remain prominent rather than relegated to certain periods across the year. For instance, because of the recent geopolitical turmoil ocean carriers face, air freight has been experiencing a high demand, fueled by rising e-commerce platforms that cannot wait for longer shipping schedules. Naturally, this demand for air freight has led to increased rates, and it is not even the official peak season window.
Technological advancements will also make things much more interesting. Carriers increasingly leverage dynamic pricing models and other logistics tech solutions to better predict peak seasons. This will help them manage contract rates better, allowing them to gain more rather than remain tied down because of prior negotiations. However, shippers can mitigate these through integrated technology solutions that will help them with demand forecasting, allowing for more efficient planning of the shipping operation. More collaboration is also encouraged.
How Freightify Helps Manage Peak Season Surcharges Freightify is a digital freight forwarding platform that helps users manage peak season surcharges by leveraging exciting features like rate procurement and API. These features allow users to procure and manage rates from a vast pool of carriers. This way, they can get to the best quotations faster, improving their decision-making. With API, users can integrate the shipping process for more visibility, market insights, and better planning. Connect with us today to feel the difference.
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