The irony of late fees with guaranteed service refunds.

Guaranteed Service Refunds (GSRs) is an insurance policy on your parcel shipments, ensuring that if a package is delivered even a minute late, you would be entitled to a full refund for that parcel’s cost. With millions of packages delivered daily, even a 1% late delivery rate could result in hundreds of thousands of dollars paid out in refunds should shippers file claims. More than a year ago, FedEx and UPS suspended this policy for all U.S. origin shipments at any service level due to volatile market conditions. The Carriers’ GSR policies or Money Back Guarantee (MBG) have now been partially reinstated for select US domestic services.

Carriers guaranteeing on-time delivery seems like a given. After all, isn’t that what they are supposed to do? But if a package has not been delivered on time, it’s up to the shipper to take action. A Carrier will never bring it to their customers’ attention when a delivery time wasn’t met. The only recourse a shipper has, is to perform parcel invoice audits, reviewing each individual invoice for every shipment to confirm delivery. This could be a daunting task when one may have thousands of shipments to audit.

Since the refund programs have now been put back in place, Carriers are enticing shippers to sign a GSR waiver in exchange for incentives or discounts. Opting out of the GSR program means the shipper will have no recourse in recovering the costs of parcels that did not meet their designated service levels. This leaves the Carriers without any accountability or incentive to deliver on-time.

When it comes to a Carrier guarantee, it’s also important to understand the term “guarantee.” The MBG/GSR offered by FedEx and UPS don’t come without stipulations. They are diligent in their methods to avoid issuing refunds or credits, using verbiage in terms and conditions that define many exceptions. These could include “suspending or modifying without notice,” and excluding packages with incorrect address, and even inclement weather.

Guaranteed Vs. Non-Guaranteed Services

There are plenty of valid reasons to use a guaranteed service or choose not to. Before you make this decision, there are steps you can take to help evaluate your fulfillment needs. When shipping cost and spend are the main concerns, businesses may opt for incentives or rate discounts in exchange for waiving a refund on late deliveries. If speed and on-time delivery is more important, it’s wise to not sign an MBG/GSR waiver. But the responsibility of confirming that the Carrier follows through on their obligation to deliver packages on-time will fall on you, as refunds are only provided per your request, and after a review. That time taken for this process also accounts for a cost.

If both on-time service and overall costs are important to your reputation and bottom line, contract negotiations and auditing are essential. The shipping consultant experts at LJM Group assist with successful Contract Negotiations to obtain incentives and discounts while keeping the MBG/GSR as part of a contract. LJM Group also provides Parcel Auditing Services to recover costs and achieve substantial savings. And if you are not aware of our Logistics Advisory Services you should take the time to learn how we may be able to help lower your overall shipping expense.