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UPS and FedEx Re-Negotiating Contracts to Eliminate Guaranteed Service Refunds/Money Back Guarantees
by LJM Group
UPS and Fed Ex have embarked on an initiative to renegotiate customer contracts to include the elimination of the Guaranteed Service Refunds (GSR’s)/Money Back Guarantee. They have also begun adding language into their agreements stating the use of a third party to track shipments is strictly prohibited. Why are they doing this, you ask? The carriers know quite well that shippers do not have the time, the technology, the expertise or the desire to identify, claim and reconcile late delivered shipments. If it were to the shipper’s advantage to waive their right to claim their money back for late deliveries, the carriers would not be asking them to do so.
The two major small parcel carriers continue to increase their rates and accessorial charges by upwards of 10% year after year, while at the same time making an obvious effort to have their customers waive their right to hold them to an on-time guaranteed service standard. Each January the carriers’ typically state the reason for their yearly increases is to help them better service their clients. How is it that asking shippers to forgo the guaranteed delivery times is serving them better? These are the same companies referring to you as their partners.
How can not holding your carrier to an on-time delivery standard negatively impact your business? I can tell you how: Potential unsatisfied or lost customers, increased customer service calls, increased returned merchandise, lost shipping charge revenue, etc. Ask your clients how they felt this past holiday season when the carriers didn’t deliver their packages on time for Christmas. Then try telling them that you waived your right to hold the carriers to an on time delivery standard because the carrier gave you and extra 2% discount (which by the way, you could have received without having to give up your right for late delivery refunds). Do your clients’ know that you don’t hold UPS/FedEx to a guaranteed on-time shipping standard? Would you want them to know? If the answer is “no”, it’s probably not a good idea!
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 ask you to disregard all that time, effort and investment to your company’s infrastructure and not hold them to their “self-implemented” on time 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.
Note: Recent studies found the two main reasons why consumers will purchase online is (1) Free shipping and (2)getting their packages delivered when expected.
The carriers will typically offer an additional incentive in exchange for you not holding them to a guaranteed service standard. They may also try to add language in their agreement stating that as long as they are 98% on time, you cannot file for a late delivery (with the carrier auditing themselves). Neither of these should ever be acceptable.
If your carrier asks you to waive your right to audit your invoices for late deliveries, a big RED FLAG should go up. The carrier’s goal is to deter you and professional auditing companies from thoroughly analyzing and auditing your invoices. The carriers ask you to waive your right to claim late delivery credits because they know that many auditing companies rely on the revenue from late delivery refunds in order to help provide them the resources to put the time and effort into identifying additional billing errors, such as: duplicate billings, erroneous address corrections, inaccurate residential adjustments, dimensional weight errors, packages manifested but not shipped (voids), and rating errors to name a few. More importantly, the carriers want to keep the auditing companies out of their accounts because many auditing companies also help their clients re-negotiate their carrier agreements. This costs the carriers many millions of dollars per year. Do you think there is a reason why UPS and FedEx will no longer deal with professional parcel contract negotiating firms?
In our many years of negotiating carrier agreements, we are certain, that through proper negotiations, you will be able to receive the so-called additional incentives the carriers may offer you while also maintaining the right to hold them to their delivery guarantees. You do not have to sacrifice service for price. After all, it is ultimately your customer who suffers from the service failures.
As the carriers continue to raise prices, we recommend that you never give up your right to file for late deliveries and when it comes time for contract negotiations, you seek our assistance. Since 1998, we have saved our clients tens of millions of dollars without compromising carrier service standards. The carriers provide you and your customers a valuable service for a premium price; let’s make sure you and your customers get the premium service for the premium price paid!
If you have any questions or concerns regarding the GSR waiver or if you would like to inquire about our contract negotiating services please don’t hesitate to contact us at (631) 844-9500 or email kenwood@myLJM.com.
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