Given the pending United States Postal Service rate increases, FedEx has started informing shippers that its SmartPost rates will increase on April 27. And shippers can anticipate a similar increase from UPS SurePost and other carriers utilizing the USPS for last-mile delivery.
This appears to be another quiet announcement of increases, similar to what happened when the carriers recently made adjustments to their fuel surcharge indexes.
Whether you realize it or not, parcel carriers are implementing rate changes outside of the announced annual rate increase. While carriers employ many tactics that can be detrimental and costly for shippers, there are certain things you, the shipper, can do to offset the effect on your bottom line.
With this in mind, here’s the truth behind four pieces of insider knowledge your parcel carrier doesn’t want you to know:
Don’t pay for what you don’t ship. Shippers should not have to pay for packages that did not actually ship. Believe it or not, this actually happens with some measure of frequency. To help protect themselves, shippers that use UPS should contact their sales rep and inform them that they want to be placed on “scan-based billing” immediately. This is a process change from billing the shipper based on what has been manifested by the shipper to a process of billing the shipper based on the delivery scan. UPS strategically makes tens of millions of dollars a year this way.
Carrier reps should know what scan-based billing is, and they should know how much commission they have received from each shipper that doesn’t know about this tactic. If UPS pushes back on this issue in any way, shippers should tell their UPS reps they are going to switch to FedEx if UPS does not comply with this request. This is not a false threat because a UPS rep will also know that FedEx invoices their customers based on the delivery scan of the package. This, of course, means that a FedEx shipper does not have this issue. Shippers that contact UPS to void the shipment will have their money credited by UPS, but accounts are typically not credited unless shippers call and make the request.
You have a right to analyze the General Rate Increase (GRI). The GRI is announced annually late in the third or early in the fourth quarter, but is not all inclusive. Shippers should perform a GRI impact analysis to re-rate package-level detail by comparing the previous twelve months with the newly announced GRI rates.
Performing a GRI impact analysis is the best way to accurately project what you will spend in the coming year. Shippers may be shocked to find out that the published and announced 4.9% increase was actually more like 8-10% based on their shipping profile. How is that possible? It’s simple; the carriers announce an increase that is based on an average.
Rebates give the control to the carrier. Sometimes a carrier will offer up a rebate to the shipper that typically comes in the form of a quarterly payment based on on-time performance as calculated by the carrier. Agreeing to these types of rebates gives all the control to the carrier, essentially allowing them to hold onto the shipper’s money for up to three months.
Another issue: It’s up to the carrier to determine that on-time performance percentage. Parcel carriers have a list of exceptions they use to improve their on-time percentage when reporting to customers. Some auditing companies have learned through experience that by calling in to the carrier multiple times, they can end up getting some of those denials credited back to the shipper. In doing so, auditors have learned of the many exceptions a carrier will apply to your claim in order to deny it.
Saturday pick up charges can be invalid. Shippers that manifest packages on Saturdays, even on a seasonal basis, should audit invoices for invalid Saturday pickup and delivery charges. These charges can occur when a shipper’s operations staff works on Saturday and manifests packages, sometimes even trailers of packages. The charge will occur when a package is manifested on Saturday, but the carrier doesn’t pick it up until Monday. Shippers can be overcharged, and sometimes they can obtain carrier credits in the range of tens or hundreds of thousands of dollars.
Pay attention to the news, review your pricing agreements, conduct periodic business reviews with each of your carriers and prepare yourself with analytics prior to these meetings in order to make the most of your relationship with parcel carriers. It’s never been more important to pay attention and proactively manage your transportation activity.
John Stitz is a Senior Managing Partner at enVista