The Hidden Costs of Shipping: Understanding the Total Cost of Delivery With Kevin Hernandez

Kevin Hernandez is a shipping and supply chain solutions consultant with years of experience in logistics and the supply chain industry. His role has allowed him to form strong ties with the clients he has helped over the years. In this Q&A, Kevin discusses the hidden fees of shipping.

What determines a carrier’s rates?

"The weight and size of the package being shipped are significant factors in determining the base carrier rate. Heavier and larger packages typically cost more to ship. The origin and destination are also factors. Shipping from New York to New York is going to be a lot less expensive than shipping from New York to Los Angeles. Then there’s the delivery speed. If you choose ground instead of next-day air, it’s going to be a lot cheaper. There’s also the shipping volume. The volume of packages shipped by a particular company can impact the rate because if they ship more than they did on a regular basis, they might hit a different tier in their contract. Then there are fuel costs, which vary on a weekly basis, and additional services, such as residential as a delivery-area surcharge and insurance. So those are things that could add up to the base rate.”

What are some examples of surcharges that shippers miss or overlook?

“Many carriers are applying additional surcharges for packages that are going to residential areas, and a lot of shippers don't account for that when they’re shipping the package. They might think it’s going to a commercial address, but in reality, it’s going to a residential address. That adds another $5 to the package cost.” 

“Another one is address correction. If an address is wrong just by a single zip code number, they can get hit by like $18 to $19. There are times when the address correction fee can actually be more than the cost of the package. So, always make sure you’re using the right address or software to correct the address.”

What additional fees should shippers watch for?

“Some packages require special handling due to their weight or size. Those may incur additional handling costs. Fuel costs or fuel surcharges can be added to the shipping rate, and those fluctuate. A delivery-area surcharge is added when packages are delivered to remote areas. Residential delivery is another surcharge. There are also surcharges for address correction, Saturday delivery, and dimensional weight.” 

What surcharges might shippers expect in the future?

“It’s possible that new hidden costs or additional surcharges may be introduced in the future, as carriers continually adjust their pricing and surcharge policies to reflect changes in the shipping industry. I could definitely see something new coming down the pipeline. For example, with the increasing focus of sustainability and reducing carbon emissions, carriers may introduce new surcharges to offset the environmental impacts of shipping. Also, with the growth of e-commerce and the increasing demand for faster delivery times, carriers might introduce new surcharges for an expedited delivery or a same-day delivery.”

What’s the most important thing to remember when managing shipping costs?

“I think the No. 1 thing to remember is to negotiate your contract. A lot of people don’t do that. They've had a contract for the past 5-10 years, and they’re like, ‘Oh, we’re happy,’ or ‘No, we don’t need to do anything.’ But in reality, with the rates increasing by 4-6% every year, you should be negotiating your contract and trying to reduce it by 4-6% every year or every two years. This way, you can maintain that shipping cost year over year.” 

“Also, make sure to have a conversation with your representative about dim divisors because a lot of people don’t know about them. And have a conversation about additional surcharges. You don’t want to pay the full surcharge if you don't have to. One of my colleagues back in the day told me everything in life is negotiable. If you don’t ask, you’re not going to receive.”