UPS has ended a freeze on earned discount tiers based on large shipping volume drops caused by COVID-19 lockdowns, with some shippers seeing cost increases in the 10% to 30% range as they suddenly dropped two or three tiers, consultants and shippers report.
The freeze went into effect last April, based on 52-week rolling average volumes as of early March, 2020, just as the lockdowns were going into effect. UPS took it off around the weekend of July 10-11, catching many by surprise, one consultant said.
This and a similar freeze from FedEx had provided a form of relief from the onslaught of peak surcharges from both major carriers over the past 16 months. It’s uncertain at this point if FedEx had also ended its freeze.
“I can tell you I was not on a freeze because I dropped a tier last year, and this upsets me,” said the VP of operations for an apparel retailer. “My UPS rep told me they did freeze tiers for specific customers who were detrimentally impacted by the COVID shutdown, whatever that means.”
Examples he was given were things like book companies supplying schools or live event ticket companies. “She did confirm that it was based on a review of very specific customers, but I didn’t get an answer as to why they were included and I wasn’t,” he said. “If I follow her logic even though I dropped a tier for a while my drop in volume wasn’t enough to look at.”
Another, a director of transportation for a sporting goods retailer, said he had heard of the freeze but it was a non-issue for him “as our earned discount actually improved as business took off during COVID.”
A third, a VP of transportation for a subscription CPG retailer that ships with UPS, said he hadn’t heard of the freeze but noted “any shipper executive who asked for this or had it offered to them should have made preparations for the time this would end.”
“We instituted a process as a temporary goodwill gesture to help customers who would otherwise have experienced a drop in incentive levels as result of the pandemic,” said UPS spokesman Matthew O’Connor, referring to the freeze. “We have recently returned to the normal terms of our agreements.”
Gavin Creado, a national account manager at LJM Group, said he heard from clients around April of last year that UPS had taken proactive steps to freeze customer discounts if their rolling average volume dropped at least a portfolio tier.
“Many of them continued to be on the freeze until recently,” Creado said. “It looks like many of them are now being removed from the freeze without being notified by UPS. We have seen some customers drop 2-3 tiers, which could result to 10% to 30% higher shipping costs.”
Shippers were told by UPS reps they had sent out notifications of the freeze lifting, but somehow, they weren’t received, Creado said. He added LJM became aware the freezes had expired through weekly reviews of rolling averages on behalf of clients.
Todd Benge, SVP of Parcel Operations for Transportation Insight, said his company had heard about UPS un-freezing the tier locks. He said it made sense now as the country has opened back up and volumes returned.
“The majority of customers impacted were in the commercial space, with residential being less of an impact,” Benge said. “There is no requirement to notify the customer in regards to removing the freeze.”
Creado said some LJM clients did experience a positive impact from pandemic-driven sales and so were unaffected, seeing discount tiers stay the same or even improve. But many others across industries were affected, he said.
“Once we became aware of it, we advised clients to reach out to their UPS rep if they knew they were going to drop a tier or more,” he said. “The reps would look at the account, see there was a drop and initiate a freeze on the discount.”
Creado stressed the importance of shippers who had been put on a freeze to monitor their rolling average and track where they fall in the event their freeze is lifted.
While FedEx did have a similar pandemic-related pricing tier freeze, the impact was not as drastic, Creado said, as its wider discount bands provided more range and flexibility for shippers. “It seemed to be impacting UPS shippers more than those of FedEx,” he said.
“FedEx has been operating at peak levels since last March and has been working closely with our customers to help them navigate this new normal accelerated by the COVID-19 pandemic,” said FedEx spokesman Chris Allen. “We have worked proactively with our retail customers to minimize the effects of unpredictable shipping volumes.”
Other consultants expressed surprise on hearing of the UPS un-freeze, saying both major carriers worked with shippers on volume drops last year and reps did a good job of communicating any changes to their accounts.