Say goodbye to overpriced shipping and the headache of negotiating complex contracts with carriers like UPS and FedEx. Empact Parcel's contract engineering service uses proprietary technology and industry expertise to engineer a contract that works for your business and saves you money. Get the best rates and terms for your shipments and leave the heavy lifting to us.
Say goodbye to overpriced shipping and the headache of negotiating complex contracts with carriers like UPS and FedEx. Empact Parcel's contract engineering service uses proprietary technology and industry expertise to engineer a contract that works for your business and saves you money. Get the best rates and terms for your shipments and leave the heavy lifting to us.
In the wake of the Covid-19 outbreak, both UPS and FedEx suspended their money-back guarantee in March 2020 due to challenging market conditions. However, fast forward to 2023, the carriers are still refusing to honor their money-back guarantee for most service levels.
Guaranteed Service Levels: Next-day air services and international priority/express services are among the service levels now guaranteed by UPS and FedEx. UPS has also altered its guarantee policy, stating that next-day air services are considered timely as long as they are delivered by 11:59 pm (local time) the following day. Previously, next-day air deliveries had definite delivery times (8 am, 10:30 am, and 5 pm).
More recently, UPS and FedEx began honoring the money-back guarantee for 2 Day services as well.
Other Service Levels: There is no word yet on when UPS and FedEx will reinstate the money-back guarantee for the rest of their service mix, which includes 3rd day air, home delivery, and ground services.
Impact on Your Business: Although this is a positive development, the majority of the volume handled by UPS and FedEx remains without a guarantee. This change offers some relief to overnight shippers but fails to address the issue of service failures for all other service levels.
Eligibility for Money-Back Guarantee: As the money-back guarantee returns, it is crucial to determine if your business is eligible for refunds. Recently, both carriers have included a waiver for Guaranteed Service Refunds in their carrier agreements by default.
The money-back guarantee has long been a core aspect of UPS and FedEx's delivery services. Both carriers are committed to meeting guaranteed service commitments and offering full refunds when packages do not arrive on time. However, recently, both carriers have defaulted their carrier agreements to include a waiver to file for Guaranteed Service Refunds, making it difficult for shippers to realize these refunds.
This waiver leaves companies losing 2-10% of their total spend each week, to the benefit of the carriers. To combat this, shippers should contact their carrier representative and request the removal of the Money-Back Guarantee Waiver from their current Agreement. This will hold the carriers accountable to the on-time/accuracy standards they have set for themselves. In some cases, filing for refunds may even improve a shipper's standing with the carriers, creating new opportunities for added value.
Don't let shipping profits slip out the door. If you have any questions on removing your Guaranteed Service Refund waiver, reach out to a team of parcel specialists for assistance.
Most businesses are at a disadvantage when it comes to negotiating their parcel contracts with carriers. The carriers aim to maximize their profits and can sometimes exploit companies that don't have the knowledge or tools to secure fair pricing. Here are four key aspects to focus on during your next negotiation to increase your chances of a successful outcome:
MBG Waiver Verbiage
Minimum Reductions
Earned Discount Tiers
Accessorial Discounts
MBG (Money-Back Guarantee) Waiver: Many companies sign carrier agreements with MBG waiver language without realizing it. This waiver means that shippers are giving up their right to file for late shipment refunds. This language is becoming more prevalent in carrier agreements, but often goes unmentioned in carrier discussions.
Imagine a scenario where UPS or FedEx fails to deliver a critical package to a critical customer, damaging the customer relationship. If a refund is filed, the carrier may reject it due to the MBG waiver on the account. This is unacceptable and shippers should be able to hold carriers accountable for their standards, especially since they are paying a premium for on-time deliveries.
Solution: Do not agree to sign a carrier agreement with MBG waiver language unless the cost benefits outweigh the drawbacks.
Minimum Reductions: A crucial part of the negotiation process is minimum reductions. Every package has a published minimum charge based on service, weight, and zone. The minimum reduction is a negotiated value to reduce the published minimum charge.
For example, a Next Day Air package (Zone 2, 1 lb.) has a minimum of $30.62. If the minimum reduction is $13.00, the new minimum is $17.62. Negotiating a minimum reduction can have significant financial implications, so it's important to ensure that it's included in the contract for your most common service levels.
Earned Discount Tiers and Revenue Bands: FedEx has Earned Discount Tiers and UPS has Revenue Bands. They refer to the same concept. The Earned Discount/Revenue Band value is the sum of all gross (published) transportation charges for the previous 52 weeks. This includes gross package charges, gross accessorial, and gross fuel charges.
Knowing your Earned Discount/Revenue Band value will determine the tier and discount you qualify for in your agreement. This value can change week to week, so it's important to maintain it to avoid dropping in or out of certain tiers.
Savvy shippers know their earned discount threshold and make adjustments as their volume changes. If you're too low on your tiers, you'll receive little to no earned discount, and if you're too high, you'll cap your discount potential.
Common Questions: Will negotiating deeper discounts hurt my earned discount? No, the earned discount is calculated based on your gross transportation charges, not the discount received.
In conclusion, paying attention to these four aspects during your next parcel contract negotiation will help you secure a better deal and avoid costly mistakes.
Before 2015, UPS and FedEx used to calculate the cost of shipping packages based solely on their actual weight. However, the carriers have since changed their approach to include dimensional weight in the calculation, which takes into account the amount of space a package occupies. This change can have a significant impact on the final cost of a shipment, and it's important to understand the intricacies of how dimensional weight is calculated.
Thanks to the e-commerce boom of the 21st century, the demand for small parcel shipping has continued to grow at a rate faster than any other mode of transportation. This increase in parcel volume has effectively swayed the economic model of Supply and Demand in favor of the two carriers that most shippers utilize (UPS & FedEx).
Over the last decade, UPS and FedEx have both increased their shipping rates by upwards of 75% and continue to add new fees, surcharges, and rules designed to increase their bottom line. With shipping costs on the rise, it can be easy to lose track of how heavily these fees might be eating into your profit margin.
You’re likely already aware of these rising costs and looking for a way to generate savings for your company.
Listed below are three easy-to-implement steps for reducing your parcel spend by 25%.
Audit Carrier Invoices | Avg. Savings Generated: 1 to 2%
Auditing your UPS and FedEx invoices is a simple way to generate immediate savings for your business. Carrier charges such as Address Correction Fees, Residential Surcharges, Saturday Surcharges, and Duplicate Charges are often erroneously applied to shipper invoices. Another reason to audit your parcel invoices is to identify and recover charges associated with any manifest errors that may have been applied to your account. A manifest error occurs whenever a shipment is manifested (i.e. you create a shipping label), but never actually goes out the door. Whenever this happens, UPS and FedEx will still charge you for the full cost of that shipment unless you proactively cancel the created shipment.
File Refunds for Late Deliveries | Avg. Savings Generated: 2 to 4%
This may come as a surprise to you, but almost all UPS and FedEx shipments are guaranteed to deliver by a certain day and time. If you send out a package and it delivers even one minute late, you’re actually eligible for a full refund of the charges associated with that shipment.
In order to receive a full refund for your shipment, you must file a claim with UPS or FedEx within 14 days of delivery. Unfortunately, neither carrier is going to tell you which of your shipments delivered late, so this can be a difficult program for high-volume shippers to manually take advantage of due to the labor requirements involved.
The good news is that there are several 3rd party providers, such as Empact Parcel, that have developed technology which automates the claim filing and refund process. Most of these providers operate off of gainshare pricing, so there’s really nothing to lose by signing up for this service.
Negotiate Competitive Pricing | Avg. Savings Generated: 10 to 30%
The most impactful way to generate additional savings is almost always through carrier contract negotiations. UPS and FedEx have done a fantastic job at building substantial margin into their shipping rates, but with the right amount of knowledge and knowhow, you too can negotiate your pricing down to ensure that you’re receiving best-in-class pricing that aligns with your shipment volume and shipping profile.
While there are several different ways to approach negotiations with UPS and FedEx, I’d recommend reaching out to a 3rd party provider, such as Empact Parcel, to gain insight on how competitive your current rates are when compared to other companies with similar volume and shipment characteristics. From there, you’ll have a solid foundation to open up the pricing conversation with your carrier rep.
If you’re unsure about negotiating your own pricing contract, feel like an expert could do a better job, or simply don’t have time to focus on this, Empact Parcel offers a Full Negotiation Support service that would streamline the entire process for you and ensure that you’re receiving best-in-class pricing.
The fuel surcharge affects every parcel package. Learn how UPS and FedEx calculate the small package fuel surcharge, and what you can do to save money in a volatile fuel climate.
If you’re like most companies, your business is in constant motion. You barely have enough time to read an article, much less implement new services into your business. You’re interested in reducing your parcel spend, but you’re not sure where to start – and you sure can’t sacrifice hours out of your daily workload.
Here are 3 practical solutions for immediately reducing your parcel spend– each taking 30 minutes or less to see results. Additionally, each solution can be implemented without any out-of-pocket expenses or upfront costs.
1) Audit your Parcel Invoices
- Time Commitment: 10-minute registration.
- Savings Potential: 2-6% of your small package spend.
- Summary: Every parcel shipment is guaranteed to deliver at a certain time. If your package doesn’t deliver on-time, you are eligible for a full refund on the shipping charges. In addition, parcel invoices are riddled with refundable billing errors. Using a parcel auditing service is a guaranteed way to ensure that you’re not leaving money on the table for Service Failures and/or Billing Errors.
Most audit providers will simply charge a percentage of the savings captured, so there are no out-of-pocket costs to perform this service – just guaranteed savings.
If you’re currently auditing your own parcel invoices, it’s likely that you’re leaving money on the table. Here’s why - The Challenges Associated With Auditing Your Own Parcel Invoices
2) Monitoring Services
- Time Commitment: 10-minute registration.
- Savings Potential: 3-10% of your small package spend.
- Summary: Address Corrections. Additional Handling Fees. Higher costs due to Dimensional Weight. We’ve all seen them on invoices, but they are hard to track and seem to appear at random. With data monitoring technology, all of these hidden fees can be identified, understood, and mitigated with the proper reports. Perhaps you have a vendor that has an incorrect address saved within their ERP system, and because your account is the bill-to, the $17 Address Correction fee shows up on your invoice. We can identify these instances, and help you mitigate and even eliminate this fee altogether. In addition, FedEx and UPS do not want you to know that if you book an express shipment, and it’s a 1-day transit, you will still pay the express rate even if it went on a Ground truck. We can help you identify when this occurs, so you can learn to cut costs in real-time, by monitoring your shipping data to pro-actively reduce your shipping costs. These are just a few examples of how you can use Monitoring Services to procure savings.
3) Benchmark your Shipping Rates
- Time Commitment: 30-minute strategy call.
- Savings Potential: Up to 50% if you use this intel to negotiate new shipping contracts.
- Summary: If you ship small parcel with UPS & FedEx, the odds are stacked against you. It is becoming increasingly difficult to maintain competitive shipping rates when carriers implement an annual General Rate Increase of 4-6%. When you tack on accessorials and other ancillary fees, the annual increase is even greater. Both national carriers have entire floors of employees dedicated to pricing their proposals to maximize their profit. They invest millions of dollars each year into their sales and account managers to be well-versed in contract negotiations. And you, as the shipper, are left taking the advice of your carrier rep that “these are the best rates he/she can give out”. Wouldn’t it be nice to see exactly how your rates stack up – and to be given the blueprint for a savings strategy if your rates aren’t in-line with the market? The essence of the benchmark analysis is to provide your company with a detailed review of how competitive your rates are.
Auditing your parcel invoices is a proven way to immediately reduce your parcel spend by 2-5%. By auditing your invoices, you can request refunds for several different types of refundable charges - Service Failures, Manifest Errors, and Erroneous Billing Charges.
If your company spends $1m/year with UPS or FedEx, and does not have a process in place for auditing parcel invoices, you are likely over-spending by $20-50k each year.
With the opportunity to reduce your parcel invoices by 2-6%, you’re probably asking: “How do I capture these refunds?”.
Here are your two options -
Option 1: Audit your own parcel invoices in-house
OR
Option 2: Use a third-party to audit your parcel invoices
While it’s absolutely possible to audit your own invoices in-house, there is a considerable amount of labor, time, and experience required to capture all eligible refunds.
Consider the following before choosing to audit your carrier invoices in-house –
1. Carriers will not notify you when a shipment delivers late – This means that someone will need to manually cross reference the tracking info on each shipment with a guaranteed delivery date matrix doc to determine which shipments are eligible for a service failure refund.
PRO TIP – Service Failures (late deliveries) make up 90% of eligible refunds.
2. You must file a claim for each individual refund – Whenever a service failure, manifest error, or erroneous billing charge is identified, a claim must be submitted, tracked, and followed up on to ensure that a refund is credited back to your shipper account.
PRO TIP – Service Failure claims must be filed for within 14 days of being invoiced for the shipment.
3. Labor expenses could potentially outweigh the savings incurred from auditing your own invoices – Most parcel audit providers offer their services via gain-share based pricing. Meaning, they will only bill you for a portion of the refunds that they are able to capture. If an audit provider is not able to generate savings, you won’t own them anything.
PRO TIP – Erroneous billing charges are nearly impossible to identify without auditing software. There are simply too many different ways that erroneous billing charges can be applied to your invoices. However, these charges typically only account for 5-10% of eligible refunds.
If you’re interested to learn more about utilizing a third-party to audit your parcel invoices – feel free to check out Empact’s Parcel Audit service page at https://www.empactparcel.com/audit-recovery-service
Empact Parcel is a third-party logistics provider that specializes in cost-saving solutions for UPS, FedEx, and DHL shippers.
Amazon’s 3-year Transformation into a Logistical Empire
UPS and FedEx have been at the helm of the small package industry for many years.
In Q4 2017, Amazon announced plans to build out their own delivery network.
The idea was simple: Pulling operations in-house would allow Amazon to reduce shipping expenses and improve the customer experience through faster shipping options.
Based on commentary from both UPS & FedEx at the time, neither carrier seemed worried about the potential of Amazon being a threat.
When you’ve had a kevlar vest for 46 years (FedEx), and 110 years (UPS), it’s hard to imagine viable opposition from a company that started as an online book seller.
Throughout 2018, Amazon accounted for as much as 10% of UPS Revenue, and 3% of FedEx Revenue, making it one of UPS & FedEx’s largest customers, but also creating waves as a rapidly growing competitor.
In September 2018, Amazon purchased nearly 20,000 sprinter vans in an effort to reduce reliance on UPS, FedEx, and USPS.
By July 2019, Amazon was delivering nearly half of its own e-commerce volume.
Recent statistics show Amazon ships 2.5 billion packages per year in the US using their own fleet, compared to FedEx (3.4 billion), and UPS (4.7 billion).
Analysts say Amazon’s deliveries could double in the next 24 months, potentially over-taking both UPS & FedEx in terms of package volume.
Here’s where it gets interesting.
June 2019: FedEx ended its Air contract with Amazon.
August 2019: FedEx did not renew its Ground contract with Amazon. In other words, FedEx would no longer make Air/Express or Ground deliveries on behalf of Amazon.
FedEx pointed to the high-cost, low profitability, to service Amazon, and also mentioned cutting ties would allow for them to focus on more profitable business through other large online retailers.
At the time, Amazon volume was said to have accounted for 1.3% of FedEx revenues. Following back-to-back lackluster earnings reports from FedEx, there is speculation that removing Amazon’s business had more financial impact to FedEx than originally thought.
December 2019: Amazon announced that they would not allow 3rd party sellers to use FedEx, citing reliability concerns.
To accommodate the immense package influx of the Holiday shipping season, Amazon had to find other solutions to deliver their millions of packages that would have been delivered via FedEx. This included shifting volumes to UPS/USPS and continuing to handle deliveries in-house.
It appears Amazon has completely weeded FedEx out of its deliver network. One can only assume they will continue to chip away at UPS’ stake as well, until they have complete control of their own deliveries.
It will be interesting to see if and when Amazon takes all volume in-house, and still has capacity. Will they be content with expanding in-house on a large scale, or will they look for business on the outside, and compete with FedEx and UPS on their turf?
Only time will time will tell what will happen in the small package industry, but it appears that, at least for the foreseeable future, Amazon is here to stay.
