Rethinking UPS and FedEx contracts in light of the holiday shipping fiasco

Many companies who ship with UPS and FedEx are being offered additional discounts if they give up their right to hold the carriers to an on-time delivery standard. Waiving those rights is neither necessary, nor a good idea. You can attain those same discounts without giving up your right to on time deliveries.

In light of the shipping fiasco which took place around Christmas, with both UPS and FedEx missing expected delivery times for many shipments, I thought it was appropriate to repost an article I wrote awhile back.

I preface this article with two important points:

First – you as a shipper should understand that you are not entitled to a “money back guarantee” for late-delivered ground packages during the holiday season. That’s because both UPS and FedEx discontinue their guaranteed delivery time refund policy for ground shipments for the two-week period prior to Christmas Day. But remember, the very important air and international shipment guarantee is still is effect, with a 90-minute delivery time extension. — December 2013 was by far the best month LJM Consultants has ever had with regard to obtaining shipping refunds for our clients due to late deliveries…

Second – getting your money back for late-delivered shipments is not going to make your customer’s child, who didn’t receive her Crayola Melt N’ Mold Wax Factory under the tree this year, feel any better. However, it will give you some feeling of retribution and it will also alert your carrier(s) to the fact that if they mess up on your companies deliveries, it is going to cost them. Also, do you think there is a chance that the UPS/FedEx hub managers know which of their clients has waivers and which do not? Could that influence whose shipments get processed first? Just asking!!!

Given the recent developments, this may be a real good time to think about how your customers feel when they do not receive their shipments on time during the other 11 and a half months of the year and not just the holiday season. It is never a positive feeling for your customer and it is never a positive reflection on your company when a package is delivered late. You, the shipper, and not the carrier, are often blamed for shipments arriving late. Unfortunately, you are impacted significantly because you likely have twenty or thirty competitors and your client is going to order from one of them next time. While UPS/FedEx’s only national competition is each other.

Recent studies found the two main reasons why consumers will purchase online are (1) convenience and (2) price, and the two top factors that lead a consumer to making a purchase are (1) Free shipping and (2) getting their packages delivered when expected. With that said, why would you ever give up your right to hold your carrier to a guaranteed delivery time? You are basically handing your packages to UPS/FedEx and saying, “here, deliver these packages when you can, I know you will try your hardest?”

The following is the original article I wrote, with a few minor edits:

UPS and FedEx are two of the best-run corporations in the United States and they are extremely good at what they do. However, both carriers are continuously trying to renegotiate customer contracts to include the elimination of the right for shippers to file claims for Guaranteed Service Refunds (GSR’s)/Money Back Guarantees. This is rarely, if ever, a wise decision for a shipper.

Before you agree to waive any of your rights you may want to ask yourself “How could not holding your carrier to an on-time delivery guarantee negatively impact your business? Let me list a few possible outcomes of late-delivered packages: potential unsatisfied and lost customers, increased customer service calls from your clients asking where their packages are, more merchandise returns, lost shipping charge revenue and restocking costs.

Most companies spend a tremendous amount of time and money putting processes in place to ensure the customer service experience for their clients is the best it can be; from the time an order is taken to the time it is shipped. Why then would your carrier expect you to disregard all that time, effort and investment to your infrastructure and not hold them to their service guarantee? Shipping is your last chance to make a good impression on a customer. If a package is late, it can destroy the entire customer experience. The 2013 holiday shipping disaster is a great example.

To entice you to give up your right to file for late delivery refunds, your carrier may offer (1) an additional incentive in exchange for you not holding them to a service standard or (2) add a clause in their agreement stating that as long as they are 98% on time, you cannot file for a late delivery refund. Who is monitoring that by the way? And who doesn’t care if 2% of their clients don’t get their shipments on time? Waiving your rights is simply not a good idea. The waiver is not proposed to benefit you.

I often wonder if the real reason why carriers promote the GSR/Money Back Guarantee Waiver is ultimately to try to discourage the shipper from using a professional outside auditing/contract negotiating company–a company like mine, LJM Consultants. Knowing that the majority of auditing companies focus primarily on guaranteed service refunds for their income, a shipper who has waived their right to claim late delivery refunds is much less appealing to an auditing company. Many auditing companies will not take on a client that has a GSR Waiver.

The better auditing/contract negotiating firms are not deterred by the GSR Waiver because they understand there are many additional savings opportunities, including: inaccurate residential adjustments, duplicate billings, dimensional weight errors, bogus address correction fees, packages that were manifested but not shipped, and delivery area (rural) surcharges, to name a few.

Finally, I strongly believe the carriers are far less concerned about the 1% to 2% loss of revenue due to refunding shippers for late deliveries and much, much more concerned about the possibility of a 10% to 25% loss in their revenue when outside professionals begin educating their clients and helping them improve their carrier agreements. Having you waive your rights to guaranteed deliveries is their first step to eliminating outside experts. Actually, I forgot, it is the second step. The first step was back in 2010 when both UPS & FedEx decided collectively that they will no longer deal directly with professional third party negotiating companies. Do you think there may possibly be a reason for that? Do you think it was to benefit you, the shipper?

Thanks to our many years of experience, we can be certain that through proper contract negotiations, you will be able to receive the additional incentives the carriers offer while continuing to hold the carriers to a service standard. You do not have to sacrifice service for discounts. After all, it is both the shipper and the customer who potentially suffer from the service failures.

We recommend that you never give up your right to file for late deliveries and when it comes time for contract negotiations, you seek professional assistance.

Ken Wood is the founder and owner of LJM Consultants, which helps retailers and other shippers negotiate shipping contracts and audits UPS and FedEx invoices. He can be reached at kenwood@myLJM.com or 631-844-9500.