This past May, U.S. parcel shippers were hit with major price hikes from FedEx and UPS when the delivery services implemented domestic surcharges at short notice. UPS increased their surcharges on May 31 with FedEx close behind, increasing surcharges on June 8 to keep up with the competition. With the COVID-19 pandemic increasing the number of e-commerce shipments made, it wouldn’t come as a surprise to see these surcharges jump up again soon.
Oversize fees, delivery area surcharges, and accessorial charges are always prepared to increase. That being said, it’s important to make sure your business isn’t being taken advantage of during parcel contract negotiations. To help you avoid losing money, here are three items your business needs to negotiate with FedEx and UPS throughout the rest of this year.
GSR Waivers
When you’re getting ready to renew your parcel shipping contract, you mustn’t sign a GSR waiver. A GSR waiver is a Guaranteed Service Refund that prevents a shipping client from recovering the costs to ship a package if the carrier delivers a package late.
GSR waivers, such as the FedEx Money Back Guarantee and UPS refunds, are typically added to parcel contracts in exchange for additional discounts and extra incentives. However, despite these discounts and incentives, it’s important not to sign a FedEx Money Back Guarantee or UPS refund guarantees. This is because, if you check your parcel audit, GSR waivers such as the FedEx Money Back Guarantee can end up costing you 3% to 5% in lost revenue because carriers won’t be held accountable for late deliveries.
Weight Surcharges
The U.S. is the biggest market by parcel expenditure, making about one-third of all money spent on parcel shipping. Weight surcharges have increased for both FedEx and UPS. Weight charges apply at 50 pounds (actual weight) instead of the current 70 pounds. That’s a significant cost for shippers at $24 per instance. It’s in your best interest to request a discount with your carrier to find a way to offset this increase in expenses.
If you can’t get a discount for these new weight surcharges, consider exploring your network with an RFI, or Request for Information. An RFI can help you determine which carriers to invite to a Request for Proposal (RFP) if they meet your requirements through the RFP process. Switching carriers can help your business expand its network and build credibility in the marketplace.
Rate Caps
For different UPS and FedEx service levels there are different rate caps. A rate cap is crucial for parcel shippers when it comes to saving money on shipments because it helps to keep rate increases in check. However, rate caps are limited only to transportation charges. Still, depending on the UPS and FedEx service levels where charges are expected to increase, negotiations can be made to limit that rate increase to improve savings.
Looking for parcel contract negotiation support?
It’s no secret that parcel contract optimization and negotiation is challenging, especially when you’re not familiar with making parcel audits. Fortunately, you don’t need to sweat your parcel audits when you work with AFMS. AFMS has the experience you need for parcel shipping contract negotiations support. For more information about our freight pricing support and negotiation services, contact AFMS today.
