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Minimize Shipping Costs And Package Delays With FedEx And UPS Service Guarantees

May 14, 2021

5 min read

In the commerce world, there are only 3 things you should do to keep your customers happy:

  1. Deliver products on time
  2. Deliver quality products
  3. Deliver a great customer experience

Delivering quality products consistently is what keeps your business alive. But what keeps your business growing, is fast shipping, great service, and on-time delivery.

However, with Covid-19 lockdowns, and unpredictable weather, the unpleasant surge in shipping costs has become inevitable today.

“I just had a quote from a big cargo (company) – Dallas (Texas) to Sierra Leone, Freetown – at $105 a kilo, which is outrageous. The “normal price” would be $4-$6 per kilo.”, said Paul Molinaro, WHO COO, Support and Logistics.

That’s a 2,525% increase in freight service charges.

Price inflations like these have shaken logistics operations across the globe. It’s placed a heavy burden on the world economy.

What’s worse is, these inflated freight charges still didn’t guarantee on-time delivery.

And services like FedEx and UPS, that did have a service guarantee in place, revoked their refund policy in March 2020.

Why did FedEx and UPS revoke their service guarantees in March 2020?

UPS delivers about 17 million packages on a daily basis.

UPS and FedEx hold a near-perfect track record of delivering these packages 98-99% of the time, on time.

Given the colossal volumes of packages, these freight companies deliver, even a 1% miss translates into millions of dollars in losses.

At the onset of the pandemic, work and travel restrictions due to Covid-19 lockdowns made it extremely challenging for carrier companies to deliver their packages on time. It heightened market volatility.

This means the number of delivery misses these companies faced surged substantially leading to compounding losses. Due to lockdowns and transport disruptions, the carrier companies were reporting a 20% increase in delivery delay than usual. This resulted in a strained customer service experience. Providing service guarantees made no sense for the carriers under such circumstances.

Moreover, continuing business as usual would have been a bad business decision on the carriers’ part, as it would have led to a huge revenue loss. That’s when FedEx decided to renegotiate their customer contracts and announced the global suspension of their money-back guarantees on March 23, 2020.

3 days later, UPS followed suit by citing Covid-19 logistics overhaul as the main reason behind suspending their guarantees as well.

Suspension of service guarantees and their impact on SMBs

Prior to April 2020, you could claim a full refund of your money if UPS or FedEx failed to deliver your packages.

As a supply chain company, this alone could have helped you with at least 20% in shipping costs savings.

But, in addition to suspending service guarantees, FedEx and UPS also imposed peak surcharges, additional fees, and caps on volume for large shipping companies. Therefore, a loss in revenue for SMBs, commerce companies, and supply chain companies was imminent.

With money-back guarantees out of the equation, trade and commerce companies had no other way to cope with the added cost of delayed deliveries.

The revoked service guarantees further caused shipping and logistics companies to suffer thousands of dollars in losses. All things considered, this made supply chain companies struggle to get through a normal business day. It also left the carrier companies with a pile of dissatisfied customers and losses.

But the good news is, FedEx and UPS service guarantees are back as of April 2021. This means that the shippers can request a refund on the shipping cost in case of delayed deliveries.

Explained: Benefits of the new FedEx and UPS money-back guarantees

Both FedEx and UPS have restored the money-back service guarantees.

This means you can now claim a full refund from carrier companies in case of package delays.

But, for select services only.

What services are covered under the new money-back guarantee scheme?

Here’s the complete list of the FedEx and UPS services with and without guarantees.

FedEx service guaranteesUPS Service Guarantees

How can supply chain companies use these guarantees to optimize shipping costs?

Overview of current surcharges and overhead costs for supply chain companies:

  • FedEx announced several peak and oversize surcharges in January 2021
  • Residential Ground and Express surcharges — 30 cents per package — will apply to shippers with combined volume across the two services exceeding 40,000 parcels in a week
  • Oversized parcels exceeding 96 inches in length or 130 inches in length and girth, will be subject to a $30 surcharge
  • Parcels that require additional handling will come with additional charges
  • UPS announced peak surcharges in February 2021
  • UPS is charging more than 50% more surcharge to parcels arriving from China and Hongkong as compared to parcels from Australia, New Zealand, and other Asian countries
  • Currently, shipments from Europe to the USA have one of the lowest surcharge rates by UPS

Here’s what logistics companies should do to optimize shipping costs and file a dispute to claim a 100% refund in case of package delays:

  1. Measure the impact of your shipping practices and renegotiate carrier shipping agreements
  2. Analyze and identify shipping characteristics and compare them with the market
  3. Track your shipments and monitor the delivery status in real-time
  4. Identify service failures that may have occurred while shipping products
  5. Note the delivery instances that may have suffered due to carrier errors
  6. Dispute valid FedEx and UPS claims according to the reinstated guidelines and policies
  7. Expedite your audit and claims process through automation

Looking to automate your logistics operations? We help you take proactive steps to spot and stop overspending. Request a free demo here.

Topics: FedEx, Service Guarantees, UPS
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