UPS Announces 2019 Rate Increases

By | News, Rate Increases, UPS

Shipware Preliminary Analysis: What You Need to Know

United Parcel Service (NYSE: UPS), will increase shipping rates effective December 26th, 2019 by an average of 4.9% for UPS Ground, UPS Air & International services while UPS Air Freight rates will increase by an average of 4.9% on December 27th, 2018. The change will impact the following:

  • UPS Daily Package Rates including UPS Ground, UPS Air, and UPS International services
  • UPS Alaska and Hawaii Daily Package Rates
  • UPS Retail Package Rates including UPS Ground, UPS Air, and UPS International services 
  • UPS Hundredweight Service Package Rates 
  • UPS SurePost Rates
  • UPS Air Freight Rates
  • U.S. Origin UPS Express Freight Premium Direct Rates

In addition, there will be changes to UPS surcharges and minimums also effective on December 26th.  Notable of those changes for 2019 include the following:

ups 2019 rate increase_shipware

Here are some highlights from the announcement, showing the changes to some of the more common surcharges, along with the percentage increase.  In recent years, the largest increases continued to be reserved for those surcharges related to package size and dimensions, and this year we also see US increasing the Third Party Billing Fee by 80%!

Take a closer look at Additional Handling, Large Package Surcharge and Over Maximum Limits. UPS increased these accessorials during the 2018 General Rate Increase in December 2017 and then again in July 2018, and all 3 are going up again. Additional Handling Weight has increased over 91% in 12 months! 

The comparison below of 2018 rates to 2019 rates shows the actual impact by service and weight break. In many cases, the actual increase is over 5% – even as high as 9.34%!

An analysis by zone reveals that the increases deviate from the 4.9% mark quite a bit. SurePost<1lb is taking the biggest hit with zone 2 increase of 9.87%.

This year, UPS is giving its customers only 3 weeks’ notice of the 2019 increase whereas many contracts state that there must be a period of 30 days’ notice. Some of the most notable changes in 2019 will be the following: 

  • Fuel surcharges will now apply to more surcharges than ever before.  Included among those are Additional Handling, Over Maximum Limits, Signature and Adult Signature Required.
  • Fuel surcharges are scheduled to increase, but details won’t be available until 12/27/2018.
  • UPS will charge a processing fee when Package Level Detail (PLD) is not provided to them prior to delivery.

Both UPS and FedEx continue to create a more complex pricing environment year over year. Many shippers understand that there is usually very little correlation between the carriers’ announced average increase and the actual increase by service level, zone and weight.  The impact to their parcel budget can vary significantly from the announced average increase depending on their shipper profile. A more thorough analysis by Shipware’s team of consultants will be forthcoming. 

These increases will significantly impact each shipper; however, the increase in overall cost will vary per each shipper’s unique shipping characteristics. Please contact us if you would like a custom analysis to understand the exact impact these changes will have on your business.


Getting Started With UPS Shipping Insurance

By | News, Shipping Knowledge, UPS

Shipping is a critical link to customer satisfaction. Once a customer purchases a product, they expect it to arrive on time and in good condition. And if a package goes missing or arrives damaged, the customer expects a fast resolution. The first step is calling the carrier and attempting to track down the package, but when that fails, making it right with the customer becomes the central focus, often leading to replacing the product and shipping it quickly.

After ensuring that the customer is happy, the company is left with the bill, and it’s at this point that shipping insurance comes into play.

The majority of carriers, including UPS, offer shipping insurance to bridge the gap when an unexpected event occurs. And with 5.1 billion packages circling the globe annually, shipping mishaps do occur, although they are rare. Understanding how to get started with UPS shipping insurance helps minimize loss and ensure that the process moves more smoothly. But what is UPS shipping insurance, and how does it work?

Shipping Insurance: Understanding the Basics

Shipping insurance is a service that offers financial reimbursement if a package is lost, stolen, or damaged during the transit process. Most carriers, including UPS, provide a basic level of insurance. However, if you’re shipping a high-value item, you may want to consider purchasing additional insurance.

UPS automatically covers most packages up to $100 for both domestic and international shipments. Additionally, UPS provides declared value coverage for an additional fee for packages that exceed this amount. There are limits on the amount of insurance that can be purchased, which is currently set at $50,000 per package or $100,000 per pallet.

Some types of domestic packages have higher limits, such as a maximum declared value of $70,000, depending on the contents of the package. There are also limitations on what qualifies for coverage, and we’ll discuss those shortly. The cost of the insurance has risen slightly each year, and current rates can be found on the UPS rate and service guide page.

Shipping insurance is a good option if you’re sending valuable goods or a one-of-a-kind item with UPS. Even if the cost of goods is minimal, the no-cost insurance that UPS provides can help with replacing the item in the event of loss.

Understanding Declared Value

When filling out a UPS shipping form, you’ll see a spot for the declared value of the item. Additionally, a UPS worker might ask you about the value of the item when you’re purchasing additional insurance for a package. So what is this referring to?

The declared value is the amount of money that you state the package is worth. This doesn’t take into account the packaging materials or the cost of shipping, but simply accounts for the value of the item. During the claims process, this is the amount that is considered when determining the payment for the claim. Supporting documentation may be required during the claims process, but when purchasing insurance, you simply need to state the value. According to UPS, the declared value is the lowest of the following amounts:

  • The cost of repairing or replacing the merchandise up to $100 if there is no value declared in excess of $100
  • The cost of repairing or replacing the merchandise up to the declared amount if the package had a declared value

The cost paid is the actual cost of the damaged or lost property, and the replacement cost includes the amount charged for repairing or replacing the item. Repair quotes are UPS’ responsibility; however, you may provide a third-party repair evaluation. If the third party says the item can’t be repaired, the actual or replacement value will be paid up to UPS’ maximum liability.

The Fine Print of Shipping Insurance

Shipping a product to the customer includes many expenses, including the employees’ time, the packing materials, and the cost of shipping. Additionally, there is the actual cost of the product. UPS only pays the actual cost of the product should an unexpected shiping event occur. The cost of these other items are not included.

That’s why it’s a good idea to read the fine print to fully understand what’s covered and what isn’t when purchasing shipping insurance. For example, if you have purchased additional insurance, you don’t want to later learn that an item is excluded when making a claim. A number of items are excluded from the company’s insurance, such as coins, cash, or precious stones. Other carriers, such as Federal Express and the United States Postal Service, have similar exclusions.

UPS has other limitations based on the type of commodity that is shipped, which are outlined in the “liability limits” section of the UPS/Tariff Terms and Conditions. According to UPS’ website, common items and applicable restrictions include the following:

Checks: If a package containing a check is lost or damaged, UPS will not pay for the face value of the check. UPS’ liability for a package containing a check or checks is limited to the cost of stopping payment on and reissuing the check(s), not to exceed US$100 per package.

Phone Cards, Tickets, Gift Cards and Similar Cards: UPS’ liability for a package containing a phone card, ticket (such as an event or airplane ticket), gift certificate, gift card, coupon or other similar printed matter with an exchange value is limited to the cost of replacing the physical card(s), certificate(s) or printed matter, not to exceed US$100 per package. As with checks, UPS is not liable for the face value of any phone card, gift certificate, gift card, coupon or similar printed matter.

Media: UPS’ liability for loss or damage to a package containing documents, film, photographs (including negatives), slides, transparencies, videotapes, compact discs, laser discs, computer tapes and media of a similar nature is limited to the replacement cost of the media on which the content is recorded.

Pairs, Parts: In the event of loss or damage to a pair or set of articles, UPS’ liability is limited to the value of that part of the pair or set that is lost or damaged, and UPS shall not be liable for the value of the whole pair or set. In the event of loss or damage to any part of the property (including any part of a machine) that, when complete for sale or use, consists of several parts, UPS shall be liable only for the value of the part lost or damaged, not to exceed the declared value of the part lost or damaged. In no event shall UPS be liable for the value of the complete item.

Insurance limitations may also apply to the shipping location. Check with UPS to ensure that if you purchase additional shipping insurance, the area where you are  shipping to is covered, especially when shipping items internationally.

Packing Rules and Restrictions

One more thing to consider is insurance packaging. For example, let’s say that an employee improperly packages an item. When the item arrives at the customer’s address, it’s damaged. You replace the item and then open a claim with UPS. The carrier will likely request to see the shipping packaging, and upon review, may determine that you did not follow their requirements for packing the item, and are therefore not protected under the insurance program.

UPS uses a third-party vendor to manage this process for insurance claims that exceed $100, and the vendor adheres to the small package carrier standards, known as the ISTA 3-A packaging guidelines, to analyze the integrity of the packaging job.

For example, one requirement is that you “always use new or like-new packaging.” That means that if a low-quality box is used, damages might be excluded and not covered in the event of damage during transit.

What to Expect When Filing a Claim With UPS

A customer calls your business, angry because a package is late or has never arrived. A quick investigation with UPS determines that the package cannot be located. This is a rare event, but one that requires quick action. A replacement product is sent to the customer with an apology to ensure that they aren’t dissatisfied. But at this point, you’re left dealing with recovering the loss.

As soon as you suspect a package is lost or stolen, file a claim with UPS right away. UPS gives shippers up to nine months to file a claim; however, filing a claim quickly will ensure that you have all the documentation the carrier might request. For example, supporting documentation may be required, such as photos of the item, or information about the value and packing material in the case of damaged products.

The first step that occurs when filing a claim is the search for the package. If the package is not located, UPS sends a letter that authorizes the claim. At this point, documents are sent to the third-party company UPS uses to process claims. Once the carrier has the documentation, the process unfolds quickly. On average, UPS says the process is typically completed within five to 10 business days. For domestic shipments, claims must be filed within nine months after the delivery date of the package, and for international shipments, claims must be filed within 60 days.

It’s also important to note that replacement of a product may not be provided when an item can be repaired. For example, let’s say that you’re shipping a computer. The computer arrives damaged and not working, but upon further examination, it’s determined that the video card is broken. In this situation, the carrier wouldn’t pay to replace the entire computer, but instead to replace and repair the video card.

Shipping with Greater Peace of Mind

Although billions of packages are circling the globe each year, your chances of losing a package with UPS are rare. But when it does occur, the process is frustrating. First, the company must deal with the frustrated customer, making things right on their end. Then they must invest time in recovering what they can of the loss. It’s not an ideal situation, but by planning for a small number of packages to have this problem, processing the issues will be easier, and having the right insurance in place is key.  

Setting internal policies for handling lost packages is critical to making the process smoother. If a customer calls and says a package is lost, missing, or damaged, what will your company do? Making sure that everyone is following the same policy will streamline the process and mitigate the risk for additional customer aggravation.

Taking into account the value of the item that you’re shipping and UPS’ insurance maximums will help create better decisions and policies. Additionally, when you understand the fine print of UPS insurance coverage, such as the exclusion of coins and other items, you’ll know what to expect in these situations.

Many different factors play a role when you decide to purchase shipping insurance, but by keeping all these details in mind, you can mitigate risk and ensure that your item arrives at its destination with greater security.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

UPS Holiday Shipping Deadlines & Other Helpful Tips

By | News, Shipping Knowledge, UPS

Online shopping during the holidays is consistently growing, and this year will be no exception. During 2016, online holiday shopping accounted for $94.4 billion in revenue, and in 2017, that number grew to $108.15 billion. According to this year’s spending predictions for Black Friday, online shopping is expected to reach $5.8 billion, which is a 15.31 percent increase from 2017. Most retailers know that a spike in revenue is coming, but the key to handling increased volumes is by preparing early.  

Carriers will frantically be delivering packages under intense deadlines and with customer expectations that demand no mistakes. A late or damaged package could translate to a fumbled gift, a mistake that customers rarely forgive. What’s more, mistakes during the holiday season have a ripple effect throughout the coming months. So how can retailers prepare?

Preparation requires many steps, but one significant area that requires attention is shipping. UPS is a common carrier for holiday shipping, and by having a strong understanding of UPS deadlines and what can be managed under intense pressure, retailers can adequately set expectations with customers. Read on to learn important UPS holiday shipping deadlines and other helpful tips to kick off a holiday season that over delivers.

Important Dates for Holiday UPS Delivery

Customers eagerly await package deliveries during the holiday season, checking off items on their shopping lists as each one arrives. A late delivery could amplify negative emotions in an already stressed-out shopper. Minimize this situation by marking your calendar and planning for critical UPS shipping dates during this peak season. Check out the below dates and view the entire holiday schedule here.

Monday, Dec. 17. UPS 2nd Day Air packages picked up today are scheduled for delivery on Thursday, Dec. 20. UPS 3 Day Select packages picked up today are scheduled for delivery on Friday, Dec. 21.

Tuesday, Dec. 18. UPS 2nd Day Air packages picked up on this date are scheduled for delivery on Friday, Dec. 21. UPS 3 Day Select packages are scheduled for delivery on Monday, Dec. 24.

Thursday, Dec. 20. Mark this date on your calendar, because it’s the last day to ship UPS 2 Day Air packages for delivery on Monday, Dec. 24.

Friday, Dec. 21. This is the last day to ship UPS Next Day Air packages for delivery on Monday, Dec. 24. UPS Next Day Air service may also be available for delivery on Saturday, Dec. 22. However, these packages must be processed and labeled for Saturday delivery, which is not available in all ZIP codes.

Saturday, Dec. 22. Delivery of UPS Worldwide Express, UPS Next Day Air and UPS 2nd Day Air packages are processed and labeled for Saturday delivery.

Sunday, Dec. 23. No UPS pickup or delivery service is available. However, UPS Express Critical service is available.

Monday, Dec. 24. Pickup service is available only for Air and International Air packages if it’s pre-arranged by Thursday, Dec. 20.

Tuesday, Dec. 25. This is a UPS holiday, and no UPS pickup or delivery service is available.

If you have specific questions, you can also use the UPS Calculate Time and Cost tool, which will help to determine the best shipping dates for your package.

UPS & FedEx Peak Surcharges

Another factor to consider during the holiday season are the UPS and FedEx peak season surcharges that may apply to customer packages. One or more of these surcharges may apply during the peak period of the holiday season, and they vary based on the selected service level and characteristics of the package.

This season’s peak period is roughly from Nov. 18 to Dec. 22 for UPS and Nov 19 to Dec 24th for FedEx. It primarily impacts a limited number of packages that exceed standard size or require additional handling.

The one area FedEx and UPS differ is the Peak Residential Surcharge.

Surprising many, FedEx will not implement this surcharge for the second straight year, while UPS will not only apply the Peak Residential Surcharge once again, but will raise the rates established last year.  

There is always the question of what constitutes a residence vs a business run out of a residence.  Per UPS website:

“A Peak Surcharge will apply to each package addressed or delivered to a location that is a   home, including a business operating out of a home. The Peak Surcharge will apply in the amounts set forth in the charts below to the indicated service levels and during the specified   Peak Periods:

Residential packages with origin and destination within the 48 contiguous states, and    packages with Alaska or Hawaii origin:

*Source: UPS

Residential packages shipped from an origin within the 48 contiguous states to a destination within Alaska, Hawaii, or Puerto Rico:

*Source: UPS

Additionally, there may be peak surcharges applied to large packages. For example, a Peak Surcharge will apply to packages with length plus girth [(2 x width) + (2 x height)] combined over 130 inches. In addition, a Peak Surcharge will apply to Domestic packages with a length exceeding 96 inches. Plus, there is a surcharge applied to additional handling of packages. For example, if an items ships in a barrel, drum, pail or package that falls into this category, it may be subject to additional fees.

To find out this potential impact on a specific package, you can use the UPS Holiday Ground Impact Tool. Additionally, you want to make sure that your fulfillment process is optimized to help you avoid these charges. These surcharges are in addition to all the other applicable charges.

Tips for Intentional Packaging During the Holidays

A customer invests time selecting just the right gift during the holiday season, places an order, and eagerly awaits the package’s delivery. As expected, the package arrives on time; initially the customer is thrilled, that is, until he or she takes a closer look. The box is damaged, and as a result, the contents of the box don’t look as expected. Even if the actual product is not damaged, giving a gift with a damaged box or an otherwise altered appearance isn’t what the customer was expecting during the holiday season, and he or she will not be happy with the experience.

Packaging more strategically helps minimize the risk for damage and reduces the risk of unsatisfied customers. See below for tips to help you improve existing processes and build loyalty during and after the holidays.

Select the right container. Are you shipping in a box? If so, UPS recommends that you select one that is large and strong enough to protect the items inside, and one that allows you to surround the contents by a minimum of two inches with something that can act as a cushion, such as packaging materials.

Avoid “over-packing” boxes. Strike the right mix between including enough packaging material to keep the package contents safe and not overpacking the box, which can also lead to problems. Select boxes that are large and include enough space to add the required “cushioning material” without “overstuffing.”

Use a single box for efficiency, but pack items separately. A customer may purchase multiple items from your store, and the most cost-effective way to ship those items is together. Retailers, however, can run the risk of damage when these separate items aren’t packaged well within the box. When shipping items together, wrap those items individually and include enough cushioning material around each item within the box.

Continue to evaluate the shipping process. Even if the packaging and shipping process is working, it’s never a bad idea to have an annual review. There may be additional opportunities to reduce risk for damage and streamline existing processes.

Getting packages to customer on time is critical during the holiday season, but it’s also important for retailers to minimize risk for damage. By doing so, you create a situation in which the customer is thrilled that he or she received the package on time and that the condition is also exactly what was expected, which is a win during the holidays.

Maximize Shipping Performance During the Holiday Season

Packing items intentionally is a good start to holiday shipping, but it’s also a good idea to look for ways to improve performance. The holidays are the perfect time to build trust with customers and create lasting relationships. If you deliver on promises during the busiest time of year, customers know they can trust you in the months that follow.

Doing this successfully, however, requires that retailers create processes and procedures that provide a smooth experience. The customer experience is a moving target, and with the Amazon effect in full swing, the demands that customers place on retailers have never been higher. Use these tips for preparing during the holidays.

Start early. A competitive advantage starts with early planning. Target areas such as inventory, staffing, promotions, and forecasts for all selling channels to help put together a strategy for navigating the holidays with greater success.

Fine-tune communication strategies. Stress is high during the holidays, and the thought or reality of not receiving a package on time creates frustrated and angry customers. Review existing communication processes. Do you have expectations set about holiday shipping dates? Some retailers handle this by placing a message on various website pages, saying “order before XXX (date) to get your packages by Christmas.” This sets clear expectations about deadlines for the customers, and when they need to place orders.

Plan for the unexpected. There are no exceptions during the holidays. A snowstorm could mess up delivery schedules for all carriers, and some customers might understand, but it doesn’t get rid of the disappointment they feel. Sure, a huge snowstorm is beyond your control, but the customer will likely still have bad feelings. The best strategy is to plan for the unplannable. Weather may be out of your control, but if you build in a shipping time buffer, in most cases customers will get packages early. In a worst-case scenario, such as poor weather, this will provide a little extra time to get packages delivered.

Minimize the risk of overpromising. All carriers have different holiday deadlines, including UPS. By knowing each carrier’s deadlines, you can better plan when packages will arrive and build a little extra time into these estimates. The best strategy for delighting customers during the holidays is to have items arrive early, and in perfect condition.

Plan for after-holiday returns. Sales skyrocket during the holidays, and so do holiday returns during the January rush. Even if you delivered a perfect experience and the exact product requested, gift recipients may elect to return or exchange products. When reviewing shipping and holiday policies, also review policies for managing returns and how they relate to shipping schedules. Timely delivery is also important after the holidays during the rush of returns.

All carriers, including UPS, update shipping schedules annually. After the holidays have passed and business slows to normal levels, savvy retailers debrief and determine what went well and what didn’t. They can then make changes that are applied to the coming holiday season, and work toward making that a more seamless experience.

Delivering the Right Experience by Leveraging a Holiday Shipping Strategy

UPS will deliver roughly 750 million packages globally this holiday season. Many packages are moving through carriers at the same time, and if you want to minimize delays and potential damage, it’s critical to understand important deadlines and processes for minimizing risk.

With holiday anxiety pulsing through the minds of customers, building trust at this critical time of year is the key to unlocking future success. Meet holiday expectations and customers will have the confidence to purchase again and again in the future. Setting clear customer expectations and aligning them with shipping processes and goals will ensure that customers are delighted during the holiday season and that future revenue grows.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our invoice audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has more than 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent.


SurePost vs. SmartPost: What’s the Difference?

By | FedEx, News, Shipping Knowledge, UPS

Selecting the best shipping option is not an easy task for retailers already facing intense pressure to ship faster, cheaper, and more efficiently. Yet retailers know that striking the right balance between speed and cost is key to meeting customer expectations and driving down shipping costs.

FedEx and UPS have created solutions, including SmartPost and SurePost, respectively, to address this challenge. The shipping options work similarly, which leave many shippers asking, “What is the difference between the two?” Most of the differences are minor – yet understanding them can assist with selecting the right option and have a serious impact on your bottom line. But how do the services work, and what are the differences to consider when selecting the right one for your business?

SurePost and SmartPost: Understanding the Basics

Cost is a major consideration when sending packages. FedEx and UPS created SmartPost and SurePost to focus on the most expensive part of the journey: the last mile. The last mile isn’t literally the last mile of a journey but can encompass several city blocks or hundreds of rural miles. Either way, it’s the most expensive leg of shipping. A driver might not have many packages going to a specific area, and if so, this drives up the overall cost of shipping.

SurePost and SmartPost were designed to make this last leg of shipping more cost-effective by joining forces with a major competitor. A package is dropped with the regular carrier, such as FedEx or UPS, but once that package gets to that last mile, it’s passed off to the United States Postal Service.

The United States Postal Service visits every address on a daily basis, which provides an opportunity to streamline last mile logistics. As a result, SmartPost and SurePost partner with the USPS to complete the final mile of delivery for the majority of deliveries.

These services are fairly similar in their cost-saving model, which involves partnering with the USPS to maximize efficiency and minimize cost. There are some differences, and we’ll highlight those shortly. But first, it’s helpful to understand the general benefits of these services, which include:

  • Cost Reduction: One of the most appealing benefits of SurePost and SmartPost is that using these services lowers shipping costs. Targeting the most expensive part of the shipping journey allows retailers to drive down the total cost of shipping.
  • Saturday Delivery: Since SurePost and SmartPost both use the USPS for the last leg of delivery, customers benefit from Saturday delivery.
  • No Residential Surcharge: UPS and FedEx charge a residential surcharge for regular delivery services; however, this surcharge is waived for SurePost and SmartPost deliveries. Since large UPS or FedEx trucks aren’t used to complete the final mile of shipping, there is no need to assess this fee.
  • Delivery to P.O. Boxes: FedEx and UPS do not typically deliver to P.O. boxes, but when partnering with the USPS, retailers can deliver to these addresses. Some recipients prefer to receive shipments at P.O. boxes, and partnering with the USPS provides additional flexibility for customers.
  • Drop-off is Easy: No special drop-off is required when using SurePost or SmartPost. Instead, retailers can simply mix these packages in with their normal shipments without the need for a special trip to the post office.
  • Tracking is Still Available: Having the ability to track packages is key to the customer experience. Most recipients want to know where their package is in the shipping process at all times. SurePost and SmartPost allow tracking throughout the entire delivery process. However, some users note that with UPS, there is a brief period of time when the package is marked as “delivered” during the transfer from UPS to USPS. The status is updated once the package is in the system, and the shipping process continues.

The largest drawback to using SurePost and SmartPost is slower delivery times. A slow delivery time, however, may be acceptable if customers expect it upfront. This is especially true in cases of free shipping. When considering these services, it’s also important to consider the differences.

Drop Locations Vary From SurePost to SmartPost

Retailers have a large opportunity to save by using SurePost and SmartPost and targeting that last mile of delivery. In fact, the last leg of delivery accounts for up to 28 percent of a shipment’s total cost, so allowing USPS to handle it offers decent savings. UPS and FedEx, however, handle the handoff from carrier to USPS slightly differently.

UPS SurePost packages are dropped at the USPS location closest to the package’s final destination. In most cases, this is the recipient’s local post office. As a result, the package is fairly close to its final destination, which may save time in the shipping process.

In contrast, FedEx SmartPost delivers the package to the nearest USPS regional hub, which is not the local post office. For example, the regional hub might be in a major city and the recipient’s address might be in a suburb 30 miles away. The reason why FedEx uses this strategy is that it creates efficiencies for package processing, yet some speculate that it may impact delivery times. Delivery times will be discussed in more detail shortly, but this is one key difference to note.

Determining the Last Mile of Delivery

UPS and FedEx use a similar strategy to drive down costs by targeting the last mile of delivery, but with UPS, the carrier does not always use USPS for that final leg of delivery. Why?

UPS workers are in the Teamsters union, so concerns were present that “outsourcing” a portion of the delivery process may jeopardize job security. As a result, UPS handles the handoff slightly differently by using sophisticated software. This software determines whether it’s truly more efficient for UPS or USPS to complete the final leg of delivery for each individual package and schedules it accordingly. And in some cases, it’s more efficient for UPS to handle the last mile of delivery.

For example, a UPS driver might already be visiting the delivery area and have multiple packages to deliver. If so, package delivery by UPS is still efficient. In contrast, FedEx uses a more general approach for that last leg of delivery. As a result, up to 60 percent of UPS SurePost deliveries are still delivered by UPS – not USPS.

Using UPS might be more likely to keep the package with the carrier and less likely it will arrive at the destination via USPS. Whether this affects delivery speed is speculative, but it’s one key difference to consider when evaluating options. But what about delivery times? How long does a package spend in transit with each of these services? Here is a quick comparison of SurePost and SmartPost.

  • FedEx SmartPost. According to FedEx, delivery time is typically two to seven business days based on the distance to the destination. There is a longer transit time outside the contiguous 48 states. Service days are Monday through Saturday, and the delivery area includes 100 percent U.S. coverage, including service to Alaska and Hawaii; Puerto Rico; Guam; U.S. Virgin Islands; all U.S. territories; P.O. boxes; and military APO, FPO and DPO destinations.
  • UPS SurePost: Delivery time isn’t published on the company’s website, but users report it’s typically around one day slower than using UPS ground. This is because on the day UPS typically would drop the package at the customer’s door, it’s dropping it off at the nearest USPS location instead.

Shipping Fees – How They Are Charged

It’s estimated that the savings using SurePost and SmartPost are significant – as much as 20 percent when compared to using standard FedEx or UPS. And while savings are significant with each, let’s take a look at some of the potential savings and fees for each service.

  • SurePost and SmartPost do not charge a residential surcharge: When shipping packages to a residential address, there is typically a surcharge for delivery, which increases the total cost to ship a package. Neither company charges this fee for these services.
  • UPS charges about 3 percent more: UPS charges about 3 percent more for SurePost compared to standard UPS; however, still no residential surcharge is charged. When looking at the potential for slightly faster speed, this additional cost might not be a serious consideration, especially since the overall cost of shipping is lower than UPS’ standard services.

When evaluating these services, it’s also helpful to consider the exact details of what you’re shipping, such as weight and dimensions. Understanding the rules and requirements for SurePost and SmartPost is a good starting point for figuring out which one is best for a specific package.

Dimension Differences and Considerations

SurePost and SmartPost have rules about package dimensions that may influence your ability to use these services. How much does your package weigh? Are the dimensions too large? Here is a quick comparison to consider for each carrier.

FedEx SmartPost:

This service can accept a package weight of up to 70 pounds and a size of 130 inches in length plus girth. In addition, it’s important to note a few FedEx special features that are not available, including:

  • Collect on delivery
  • Money-back guarantee
  • Declared value
  • Signature proof of delivery
  • Evening or by-appointment delivery
  • Hazardous materials service

In addition, FedEx SmartPost won’t pick up packages that originate outside the contiguous United States.

UPS SurePost:

A few different UPS SurePost services are available, including:

  • SurePost Less than 1 pound, with a maximum weight of 450.76 grams
  • SurePost 1 pound or more, with a maximum weight of 70 pounds
  • SurePost Bound printed matter, with a maximum weight of 15 pounds
  • SurePost Media, with a maximum weight of 70 pounds

The total dimensions of the package cannot exceed 130 inches and must be less than 1 pound if you select SurePost; it can be 1 pound or heavier and up to 108 inches in size if you select SurePost Bound Printed Matter or SurePost Media in the UPS service box.

Moving Forward to Maximize Cost Savings and Efficiency

Selecting the right shipping option isn’t always an easy choice, especially when attempting to balance cost with speed. SurePost and SmartPost provide good alternatives to help retailers operate with greater efficiency. Package delivery may be slower when compared to traditional options, but if you communicate that clearly to customers, it might not be an issue.

Striking the right balance between efficiency, cost savings, and customer needs and expectations is the key to minimizing costs and maximizing savings. As a result, a unique synergy is achieved – one that has the potential to impact your bottom line and contribute to the future success of your company.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

How Does UPS SurePost Work?

By | News, Shipping Knowledge, UPS

Shipping is an important piece of the puzzle for most companies. But it’s not just about shipping quickly enough to make customers happy or shipping efficiently enough to realize productivity gains — it’s also about achieving lower costs without compromising the outcome.

Saving 10 percent on shipping costs might not seem like a large gain, but when you apply this to a company with high costs, the bottom line can see significant improvements. When this number is raised even higher to 20 percent, those gains quickly multiply.

When breaking down shipping, the final leg, known as the “last mile” regardless of actual distance, is where costs accumulate. That last mile might be a few blocks or 100 miles, but regardless, it’s where a large portion of your shipping dollars are going. As a result, reducing shipping bills and realizing sustainable cost savings start with this single factor.  

A key strategy for driving down costs is using a well-known shipping service that is already achieving success but has created a method specifically for targeting these last mile delivery costs. Driving that big, heavy UPS truck to your shipping destination is expensive. This is especially true when dealing with rural deliveries. As a result, UPS found a way to make that final leg of delivery less expensive, passing those savings along.

That service is called UPS SurePost (similar to FedEx SmartPost), and it’s a good solution for many businesses looking to reduce shipping costs and preserve the quality of delivery. But what exactly is UPS SurePost and how does it work?

What is UPS SurePost?

Before services like UPS SurePost, shippers were at a loss for what to do when faced with expensive last mile delivery costs coupled with negative feedback from customers about the high cost of shipping.  One of the drivers behind these complaints was the high cost associated with an increasingly popular free-shipping option. In fact, nine in 10 consumers say free shipping is the No. 1 incentive when making a purchase, according to Marketing Land.

As a result, UPS created an option that would focus on driving down the costs of the last mile so it could pass that savings along to customers. The existing model included using its own resources — big trucks, fully staffed shifts, and running many deliveries a day, sometimes to rural and expensive delivery areas. In contrast, the last mile needed to be more efficient, so the company had to think differently and utilize resources that were already in place.

The United States Postal Service has a long history of delivering packages in the United States, and what’s more, it delivers to most addresses in the United States on a daily basis. Since the USPS is visiting everywhere daily, what would happen if UPS teamed up with the postal service for the last mile of delivery, saving its trucks from duplicating delivery efforts? This is the basic strategy behind UPS SurePost, and it’s how it saves shippers money.

However, there are some differences between the traditional service and that of UPS SurePost. For example, with traditional UPS service, a package may require a signature. In this case, the UPS driver cannot leave the package and must instead revisit the address until a signature is obtained. With SurePost, this option is not available, and packages are delivered to the address on the first attempt, which is outlined in the terms and conditions.

When considering this option, you might also wonder about limitations and how large packages can be to achieve these savings. The options for delivery are outlined here, but a quick summary includes the following.

  • SurePost less than 1 lb: 1 ounce – 15.9 ounces. Package dimensions cannot exceed 130″ (length × twice width × twice height).
  • SurePost 1 lb. or greater: 1 lb. – 70 lbs. Package dimensions cannot exceed 130″.
  • SurePost Bound Printed Matter: 0.05 kg – 15 lbs. Restricted to books and printed material. Requires a SurePost Bound Printed Matter contract in addition to a SurePost contract.
  • SurePost Media: 0.45 kg – 70 lbs. Restricted to specific items such as binders, films and medical binders. Requires a SurePost Media contract in addition to a SurePost contract.

Once you decide that using SurePost is a good fit, you might have other questions, including some about the potential savings. Exactly how much can you save? Let’s take a closer look into the costs of SurePost to understand the potential savings and whether it’s right for your situation.

How much does SurePost save?

Shipping is a major expense for businesses, and SurePost promises to save you money. Every little bit helps when trimming costs, but is SurePost worth making a switch? It’s estimated that the savings from using UPS SurePost can be as high as 20 percent when compared with UPS’ own residential ground service. And if you’re using a more expensive option than UPS, these savings might be even higher.

In addition, you get further benefits, which we’ll highlight shortly. For example, since the postal service already operates on Saturdays, goods can be delivered on the weekend. Shipping packages to P.O. boxes and military addresses is also possible, a flexibility many other shippers, including traditional UPS service, don’t allow for. These benefits, in combination with cost savings, make SurePost a viable option for those looking to reduce cost and increase flexibility. But there are also drawbacks, and we’ll also cover those shortly.

Understanding the Pros & Cons of SurePost

How would saving 20 percent on shipping costs affect your bottom line? The answer is likely positively. But cost savings aren’t the only benefit of using this option. There are several more potential benefits to consider, including the following:

  • Normal pickup options are available: Using SurePost does not require special treatment for drop-off or pickup. Trips to the post office are not required, and shipments can even be mixed with your typical UPS pickup.
  • Packages are still trackable, even during the last mile: One key feature of UPS is the ability to track packages. You don’t lose this ability when using SurePost. That last leg of delivery with USPS is still trackable with the same tracking number you received when initiating shipping.
  • Integration with shipping software is possible: Software is key when managing large numbers of shipments, and integration is important. SurePost integrates with most software, which is critical if you already have a software program in use.
  • The most expensive part of shipping is managed: As highlighted above, the last mile of shipping is the most expensive piece of the cost. This single factor makes up 28 percent of a shipment’s total costs — nearly a third. SurePost directly tackles this high cost and creates a more cost-efficient option for those who ship large volumes of packages.
  • Access to Saturday delivery is available: The SurePost model dictates that most packages are passed on to USPS for the final leg of delivery. No extra charge is assessed for delivering packages on the weekend — it’s included in the service. This is an important factor because one drawback to SurePost is that it’s slower than traditional UPS service (more on this in a minute). Weekend delivery helps offset this drawback.
  • The ability to ship to more addresses is possible: UPS normally will not deliver to P.O. boxes. Depending on your business, this may or may not be a sticking point. But it’s important to note that since USPS delivers to all addresses, through this hybrid UPS and USPS model, you have the flexibility to reach many places geographically that UPS would not normally go.
  • Packages are primarily lightweight (less than 10lbs) and being delivered to residential addresses.

Members can also use “UPS My Choice” membership, which allows them to use features to reschedule or redirect delivery to an alternative address or The UPS Store. Additionally, upgraded packages may arrive one day earlier.

With all the benefits of SurePost, it’s also important to note there are a few drawbacks. As mentioned previously, SurePost might take a little longer. Making the last mile more efficient does slow down the delivery process slightly. UPS drivers must pass the packages off to USPS, which then must sort them and ensure they get to the correct addresses. Is it cost effective? Yes. But is it slower? Absolutely. But how much slower?

UPS states that packages mailed via SurePost may take anywhere from two to seven days until arrival. Some users report an average delay of about three days when compared with using UPS’ typical service.

The major source of the delay is the transfer of packages from one carrier to the other, but this is also the source of savings. Before using SurePost, it’s important to consider the benefits and the drawbacks to determine what is right for your business. In some cases, when shippers are under intense pressure to offer free shipping, it’s worth the delay as long as customers have clear expectations about shipping times upfront.

Who Should Use SurePost?

SurePost is not right for every shipping situation, but when it’s a good fit, the result of using it can be significant. For example, if you’re worried about rising shipping costs and want to get those costs down and your profits up, this might be a good option. When making the decision about whether this service is right for you, it helps to understand who might benefit most.

  • A large number of packages are shipped weekly: SurePost might not be right for those who ship occasionally, but if you ship a large quantity of packages frequently, it may be a good fit.
  • The last-mile delivery costs are high: Since last-mile delivery makes up so much of the shipping cost, SurePost may be a good option to decrease these costs.
  • Expedited delivery is not required: SurePost is not the right option if you need something to arrive at a destination fast. SurePost does have the added benefit of Saturday delivery, but if recipients expect fast shipping, this is not the right option.
  • Weekly spend with UPS is required to drive down costs: UPS determines negotiated rates based on average weekly spend. Increasing your spending and consolidating shipping from other carriers to SurePost can boost that weekly spend. As a result, you may benefit from lower fees based on increasing this spend.

The best approach is to look at your current shipping costs. Ask this question: Do these shipments need to arrive quickly? If the answer is no, then you may benefit from another option, and in the case of reducing last-mile costs, SurePost is a viable solution.

Moving Into the Future With Greater Efficiency

UPS SurePost offers a good balance of a low price and a reasonable delivery speed. It also offers significant savings over typical ground shipping options by offloading shipping to a large delivery area to USPS, which is already visiting many of the locations and can handle Saturday delivery.

When looking at the market, there is no shortage of shipping options. But the key is to find a match between the customer’s expectations and the most cost-effective method for delivery. Once you find this match and utilize creative options to slash that last-mile cost, you can create maximum efficiencies within your business.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

2018 FedEx & UPS Peak Season Surcharges

By | FedEx, News, Rate Increases, UPS

The FedEx/UPS near-duopoly has allowed the two large carriers to control marketplace pricing for years, echoing each other’s rate hikes to the detriment of parcel shippers, small and large. It’s no surprise then, on the heels of UPS’ latest intra-year pricing changes, that FedEx has recently announced its own set of rate increases, effective September 3rd.

The Additional Handling surcharge, for packages weighing greater than 70lbs, will increase from $12 to $20 for domestic express, international express, and domestic and international ground. Similarly, July 8thsaw UPS raise its Additional Handling surcharge on packages weighing more than 70lbs from $12 to $19 and increased its Large Package Surcharge from $80 to $90.

FedEx’s Unauthorized Package Charge will increase 125%, from $300 to $675, keeping them in line with UPS’ increased Over Maximum Limits charge which jumped from $500 to $650 on June 4th.

In addition, shippers will also see incremental, “peak” seasonal increases by FedEx to some of these surcharges to domestic express and domestic and international ground shipments between November 19thand December 24th. Compare these to the peak increases that UPS will institute between November 18thand December 22ndto all service levels and all domestic destinations.

  • FedEx Additional Handling:  $3.20 / UPS Additional Handling: $3.15
  • FedEx Ground Unauthorized Package Surcharge:  $150 per package / UPS Over Maximum Limits: $165 per package
  • FedEx Oversize Charge:  $27.50 / UPS Large Package: $26.20

Shippers saw changes to these same charges earlier this year, in terms of the surcharge amount as well as to how they’re calculated.

These rate increase announcements signal the continuation of a trend that began last year. The carriers don’t want these packages in their parcel network, but in their freight/LTL network. If shippers don’t adjust accordingly, they will find themselves paying a premium.  Expect this trend to continue.

The one area FedEx and UPS differ, in terms of these latest rate increases, is the Peak Residential Surcharge. Surprising many, FedEx will not implement this surcharge for the second straight year, while UPS will not only apply the Peak Residential Surcharge once again, but will raise the rates established last year.

ups and fedex peak season pricing

This could give FedEx a competitive advantage with shippers looking to shift some volume prior to peak.

UPS Strike Averted, But Shippers Should Consider MultiCarrier Shipping

By | News, Shipping Knowledge, UPS

Several weeks ago, 93% of UPS package workers* authorized their union to strike if a deal couldn’t be reached with UPS management to replace the existing contract by the July 31stexpiration.  The vote undoubtedly gave the union more leverage and ramped up pressure on both sides to get a deal done.

While it looks like a strike has been averted with a tentative deal between UPS management and labor negotiators on June 21st, the possibility of a labor disruption still exists until the agreement can be ratified.  Union dissidents are reportedly upset over several of the outcomes of the new, tentative labor agreement with concerns over “hybrid” driver status, potential Sunday hours, annual wage increases less than the rate of inflation, and concerns over ongoing management harassment.

Some UPS rank and file union workers are denouncing the outcome as a “sellout” deal.  Teamsters and UPS will continue negotiations on July 9thand, ultimately, a vote will be held.

For many shippers, this was not the first time they’ve had to deal with the possibility of a UPS strike. In 1997 the threat became a reality as workers walked out for more than two weeks.  Some UPS customers learned a hard lesson about carrier diversification and the inherent risks associated with being overly reliant on a single carrier. Those shippers who have taken critical steps to mitigate the impact of another strike are obviously in a better position to withstand one should it happen again.

But what about those shippers who either didn’t experience the 1997 strike or those who did but didn’t learn their lesson?  What can those shippers — and all other shippers for that matter — do to ensure that, if UPS workers go on strike this year or at any time in the future, their packages will still get picked up and delivered?

After 1997, many shippers took steps to diversify their carrier mix.  Many switched their primary carrier to FedEx (whose driver force remains mostly non-union), while others simply engaged alternative carriers like FedEx, USPS, DHL and regional carriers to carry at least a small percentage of their overall volume.  With systems in place to facilitate multi-carrier routing and operations, those shippers are much less likely to have lost sleep over the past few weeks as talks between teamsters and UPS management dragged on.

Even though a strike has likely been averted, smart shippers would still be wise to reach out to alternative carriers to begin the process of diversification and modal optimization.  It shouldn’t take the threat an imminent strike for shippers to take action!  Talk to all your carrier reps, get pricing in place and maybe even do some testing or move a small percentage of your volume away from UPS.  You’ll sleep better at night if you do.

As part of that effort, shippers would be smart to do a thorough evaluation of their TMS platform to ensure that it is carrier agnostic and allows for the seamless implementation of new carriers.

It’s also worth noting that carrier diversification can have a positive impact on your parcel program beyond strike impact mitigation.  Strategically introducing alternative carriers can reduce costs and improve transit times as well.  Modal optimization, or the utilization of alternative carriers for certain segments of your volume for price or time in transit considerations, is a smart business practice. Modal optimization allows a shipper to take advantage of each carrier’s strengths (while avoiding their weaknesses) while also keeping carriers hungry for that piece of the business that they don’t carry.  This can be great leverage for future pricing discussions!

Of course, carrier diversification is not without risk and complexity.  Understanding what volume can be moved without negatively impacting costs with your primary carrier is a critical piece of the puzzle.  A complimentary modal optimization assessment from Shipware can help you understand which carriers would be appropriate to consider, and measure critical items like cost and time-in-transit impact.  Good luck!


*Of those who voted. Voter participation numbers have not been released.


UPS Freight Contract Negotiation: What You Need to Know

By | Contract Negotiation, News, UPS

For anyone looking to negotiate a freight contract with UPS for the first time or any who desire to re-negotiate their current UPS freight contract, it is wise to diligently prepare for that meeting or RFP (Request for Proposal) release.  Shipping and distribution can account for nearly half of a retailer’s operational budget, so it is no doubt a savvy move to initiate discussions on ways to save your company money and improve its bottom line. Below we will discuss things to keep in mind when approaching UPS for a discussion.

UPS Freight Trends

On top of UPS freight rate increases, shippers have had to deal with an increasing number of new accessorial charges over the past decade, such as home delivery, delivery area surcharges, fuel surcharges, lift gate service, handling, palletizing and substantial shipment surcharges. In many cases, accessorial charges now add an additional 30%-40% to a shipper’s total cost.

One blunder that many shippers make when approaching contract negotiations with UPS is to do so unpreparedly where they mainly wing it. As a result, carriers are more knowledgeable about a shipper’s distribution than the shippers themselves and to make matters worse, shippers often do not take the time to comprehend the structure and terms within the UPS contract. Often times, they will enter the meeting without benchmarks and comparisons of what other companies are being charged and provided. Having this type of information can help you check false or grandiose claims by UPS on the screaming deal they’re giving you.

Do Your Due Diligence

Prior to approaching the bargaining table with UPS, shippers must analyze all of their figures to have a better grasp of costs, accessorial charges, usage, routes, service usage, weight ranges, cost per shipment, and a variety of other factors. This way, shippers have focus points and priorities when it comes to concessions that will have the most substantial cost-saving impact on their bottom line.

Figure out which surcharges you can either find ways to avoid in future practice or can be another target for waivers or reductions. Whatever UPS says, keep in mind that all accessorial fees are negotiable. Reach out to other shippers who use UPS’ service and collect benchmarks from them. Having these numbers will give you leverage and encourage them to make concessions if they are giving others a better deal.

Ask Yourself The Following Questions

If you are planning to sit down with UPS face to face for the initial meeting, be sure to do your homework and prepare thoroughly for the negotiations ahead of time. There a variety of questions that you have to ask yourself regarding your company’s shipping goals and needs:

What type of freight are you shipping with UPS?

This is one of the most significant factors during the negotiation. Know your goods: Are they prone to damage? Likely to be stolen? Are they heavy or light? Difficult to handle or transport?  Will it need specialized equipment? Are they fungible? Could they do damage or contaminate other goods? Do they have to be refrigerated or kept at a specific temperature? All of these can play a major factor in pricing in the long run.

What type of UPS shipping service do you want?

Less than truckload – Less than truckload services allow you to only pay for the space in the truck’s cargo hold that your goods use. If you are regularly shipping less than ten pallets full of goods, or your freight ranges from 100 lbs to 4,000 lbs, LTL is likely the service you would be using. With LTL you make a tradeoff of speed for flexibility. Your goods can be shipped to multiple locations, routes, and lanes, at various times, with repeated shipments. It is more cost effective since you are getting every dollar out of the space you are renting. If you primarily ship LTL, try to get a FAK (freight of all kinds) rating where all goods are palletized together and sent using the same rate base. If you cover an array of freight classifications, this could save you a ton in the long run and also make invoice audits easier.

Full truckload – With full truckload you rent out the truck’s entire cargo bay. You have the option to fill it up entirely or not at all. If you generally ship more than ten pallets or have shipments weighing more than two tons, then FTL is your likely choice. Even if you do not fill up the cargo, FTL may be your route if you have something that is very valuable, fragile, or heavy. With FTL your shipment is at lower risk since the goods never leave the truck and the only delivery locations are those you dictate.

Where do you ship?

Distance matters, unused or low-density routes/lanes cost more. Sometimes carriers do not service specific areas and have to transfer your shipment to a third party, which costs you more. If a carrier does not operate in an area where you do the majority of your shipping, why on earth would you partner with them?

Do you regularly pay your bills and on time?

Provide them with at least a half-year’s copies of invoices and payments to show that you are a reliable paying customer which gives you leverage. Will it be pre-paid, or paid upon completion of shipment?

If you have a current carrier, what are you paying them?

Freight negotiation often involves a non-incumbent carrier reaching out to pursue the shipper’s business. Provide them with some guidelines as to what you’re currently paying as an enticement for the carrier to offer better service or a better deal.

Are you growing?

Does your company have new goals, acquisitions or product releases in the near future that you expect to boost your company’s total revenue? If that answer is yes, you should request better rates that correspond with the improvement in the overall shipment volume that will be produced by an increase in revenue. It is challenging to grow in such a way that you see marginal gains based on that growth.  If you hit those tiers, be sure that your carrier sufficiently compensates you via discounts.

Are you shrinking?

Continued growth is often times unsustainable. If shifts in the economy, within your company, or in the industry, lead to a decline in profits or capital, this could have severe consequences to your budget. If you miss target tiers, you can lose a host of discounts that further ding your bottom line. Be open and honest with your carrier and be sure to form a new settlement that reflects the uncertainty ahead.

Are you a seasonal shipper?

If you are a seasonal shipper and you come to an agreement with your carrier that is executed outside of the peak season, you might fail to achieve revenue thresholds required to hit discounts in your target tier. To avoid this, your carrier should include an appropriate “ramp up” period so that your company has the time to establish a weekly rolling average that will let you reach your goals.

Other Questions Include:

  • How frequently do you ship your product?
  • What is your shipping schedule? – Which days of the week do you usually ship? If you can be flexible and pick non-peak days, you can likely get a better rate.
  • What is the tonnage of your average shipment – Does it require the carrier to come to your dock and load it up, or can you handle that?
  • What is the freight classification of your shipment? – Are their hazardous or breakable goods? Do special actions have to be taken to ensure their safety?

Early Termination Fees with UPS

If your contract has early termination fees, do everything in your power to remove them. If a customer agrees to a deal and then terminates it before the deal expires, UPS can charge you 2.5% of the total charges billed to the customer by UPS during the fifty-two weeks previous to the customer’s notice of termination. Do everything in your power to avoid getting locked into contracts with constraining terms, early terminations, deferral penalties or any other constraints. Aim for increasing base discounts instead of creating incentives with rebates and revenue thresholds.

Consider Enlisting Help

Morgan Stanley’s Annual Best Practices Survey stated, “11% of the top 400 parcel shippers in the US have hired supply chain consultants to negotiate their FedEx, UPS, DHL and other transportation contracts. Most notably, these shippers — commanding a collective $1B in annual parcel shipping expenditures — report that parcel consultants reduced shipping costs as much as 49% lower from what the company had been able to negotiate on its own.”

Before you ever enter discussions with UPS, you should contemplate bringing in outside market experts to serve you in freight contract optimization, benchmarking, negotiations, and distribution analysis. Enlisting the services of consultants can help volume shippers negotiate better terms with carriers, especially since they have a wealth of experience and industry knowledge, including benchmarks, so they know whether or not UPS is giving you the best deal possible. Many consultants will give you a free accounting of your current rates and give you an idea of ways you can save.

Always remember that your business is very important to the carrier, even one as big as UPS. You have leverage, use it! Whether or not they will admit it upfront, often times, UPS has discounts, fees, rebates and incentives that are up for negotiation. Ideally, you want the flexibility to re-negotiate when the time comes and the companies who land the best freight contracts with UPS negotiate with a clear understanding of their shipping profile and with confidence about which areas or fees need amending. Be bold and brave, but also be respectful and flexible in your discussions. Remember, this should be a long-lasting, mutually beneficial relationship, treat it as such.

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