Are You Getting Your Money’s Worth From Your Parcel Spend? (Spoiler Alert: Probably Not.)

Parcel carrier handing someone a package

There are some things that are never fun to ask. The question above is one of them, because right now, the answer is a hard “no.”

Since March 2020, UPS and FedEx have:

  • Indefinitely suspended their service guarantees
  • Hit large-volume shippers with a 30-cent-per-package surcharge
  • Imposed shipping limits on certain retailers during the holidays
  • And levied a discretionary peak/residential delivery charge for select customers

They’ve also hit shippers with another annual rate increase – and set new records for lost shipments and damaged deliveries, all while moving backwards on reducing order-to-delivery times. And let’s not forget, the carriers are enjoying record profits because of these actions.

In other words, your company is getting far less and paying far more.

The real question is, what – if anything – can you do about it?

Here at AFS, we’ve been wrestling with that question a lot, and we wish we had better news, at least on the carrier front. But the reality is that thanks largely to COVID-19 and the ongoing decline of brick-and-mortar stores, it’s going to be a parcel carriers’ market for some time to come.

However, that doesn’t mean your company can’t achieve meaningful parcel cost reductions in other ways, which is why we’d like to share the following helpful “Do’s And Don’ts.”

1.Don’t expect carriers to agree to a lower residential delivery surcharge. But do try to do a better job of double-checking your carrier invoices for erroneous adjustments.

It’s no secret that FedEx and UPS residential deliveries cost extra. What’s less known is how often both carriers’ drivers will report a completed delivery as residential when it’s really not– and how frequently your company will erroneously be billed more as a result.

That’s why a vigilant claims process is so important. By reviewing all of your invoices with a fine-toothed comb, you’ll probably find many cases of up to $5 residential charges per package that you shouldn’t have to pay. (Don’t forget that residential packages could also be assessed the additional 30 cents per package fee we referenced earlier.) The money you save by catching these erroneous charges could add up to a significant amount.

It’s also why it’s extra-smart to have a claims department that’s ultra-persistent, because while one of the two big carriers will typically respond to filed claims within a week, the other currently has an average response time of nearly four months.

2. Don’t be surprised by the fact that a greater percentage of your shipments will get lost or delayed in transit. But do employ more effective tracking to avoid the added expense of shipping more replacement items than you should.

You know that expression, “Not all who wander are lost?” There’s a similar phenomenon at work in parcel shipping, because some packages that ordinarily would arrive within days are currently taking considerably longer than that to arrive.

This is causing many consumers to assume that their orders are lost and to prematurely request refunds or replacements – and it could be costing your company a bundle. After all, if you send your customer a replacement or refund too soon, he or she will eventually wind up with one item he or she didn’t pay for (or that will cost you an arm and a leg to get returned).

In light of this, it might be time to take a page from AFS’s book and proactively track every parcel shipment you send – or at least create an alert for any package that seems to have come to a standstill. It’ll help you locate many parcels that otherwise might be written off as lost and enable you to light a fire under your carriers to get those packages back on the road (and ultimately into customers’ hands) sooner.

3. Don’t expect to be able to financially penalize your parcel carriers for poor service, at least not right now. But do try to do a better job of spelling out performance KPIs in your contracts.

Any way you measure it, the bar is pretty low for carriers’ service levels right now. Even so, that shouldn’t deter you from expecting your carrier to spell out your promised service levels within your contract.

By having these KPIs on paper rather than just relying on verbal agreements, you’ll provide your company with a more powerful way to pressure/inspire carriers to deliver the best possible service levels they can– or give it more ammunition to fight for refunds or service concessions later down the line.

4. Don’t expect your parcel carrier to sweat the possibility that you’ll take your business elsewhere. But do enhance your negotiating power by fully understanding the value that your company’s parcels bring to the table.

Like it or not, all pieces of parcel business aren’t created equal.

For example, if the vast majority of the parcels that you ship are small and dense, that’s great, because carriers would really prefer to work with your company rather than many other kinds of clients. As a result, they really don’t want to see you walk, even in a market where they have more business than they know what to do with. (Ditto if you’re a company like a subscription business, because carriers love highly predictable clients whose volumes and shipments they can plan for well ahead of time).

All of this is to say, that carriers may be inclined to give you a better deal than the one you’re currently being offered – but only if you know enough about the perceived value of your business (and your appeal as a client) to ask for it.

5. Don’t expect to make a lot of inroads with parcel carriers at the national level. But do try to work more collaboratively at the grassroots level.

When it comes to your business, the most powerful person who works at FedEx and UPS isn’t each company’s CEO. It’s the carrier rep or account manager who’s been assigned to your company

This rep may not be high up on UPS’s or FedEx’s org chart. But he or she has a lot of authority when it comes to finding you discounts, waiving certain fees or offering you financial incentives that aren’t published on either carrier’s rate sheet or website.

Make it a priority to establish and maintain as positive of a relationship with him or her as possible – even during times like this, when getting substantially better rates or reliability levels is akin to squeezing blood out of turnip. Because if anything is going to make a positive difference to your company’s overall parcel spend and service levels in the long run, it’s this. Which brings us to our final point.

6. Do be patient with the current parcel carrying issues right now. But don’t accept poor service and high prices as a permanent cost of doing business.

As long as parcel carriers’ demand outstrips their supply (which could be a long while thanks to the vast inequity between eCommerce growth and carriers’ capital expansion plans), the state of your parcel spend and service will continue to be less-than-optimal.

Nevertheless, it’s important for all of us keep applying pressure on our carrier reps and to let them know that these current pricing and service policies aren’t okay in the long run. Give them a call when you see your damage rates climbing. Ask them to intervene if your parcels’ dwell time has gotten out of hand. And continue to ask when some of the extra charges they imposed last year (because times were indeed extraordinary) are going to be phased out. The more they hear about how unhappy you are now, they more likely they are to work toward getting back to more acceptable pricing and performance in the future.



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FedEx and UPS Late Payment Fees

The payment environment has drastically changed in the past few years. Up until recently, payment terms for FedEx and UPS were 30 days. If payments

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