Many shippers really have no clue on how FedEx and UPS minimum package charges affect their overall shipping spend. Most companies do not realize there is a minimum charge that basically overrides a large percentage of the negotiated discount rates.
So what is a Minimum Net Charge?
The carriers apply a minimum net charge to all packages, this is the lowest amount a shipper will pay to send any package. For each shipment, you will pay the greater of the (a) net shipment charge based on the negotiated incentives or (b) the minimum net shipment charge. The general default minimum net charge is a Zone 2 one pound package. Here are the standard minimums for FedEx and UPS.
UPS Minimum Net Charge
FedEx Minimum Package Charge
3 Day Air
Next Day Air
Where to find the minimum net charge in your agreements.
Each carrier uses different language to specify minimum charge information. FedEx calls this ” Minimum Package Charge” or “United States Minimums:” and each service level will have the Minimum Package Charge detailed. UPS makes this much easier to find, one section with all services listed labeled ” Minimum Net Charge”
Below is an example of a UPS ground shipper with a 30% discount. Remember, the company will pay the greater of the negotiated rate or the minimum charge of $7.57. All one pound packages going to any zone will receive a discount under the negotiated 30% rate.
Negotiating Better Carrier Package Minimum Charges
Package minimums are negotiable, even if your carrier representative insists they aren’t. The biggest questions are how many of your packages are being hit with the minimum net charge? Then, how large a reduction needs to be allowed to maximize your negotiated discounts?
Refund Retriever can help identify your packages being affected by the minimum net charges. Our contract consultants can help lower your shipping costs by understanding the overly complicated carrier agreements, then figure out how to make it work for your company. We are always happy to help shippers, give us a call anytime.
Minimums in a nutshell
The vast majority of shippers are affected by minimum charges each day. The minimum charge effectively robs a company of those hard-fought shipping discounts. Since the carriers raise rates each year, this means the minimum charge also raises and will continue to rise. A complete understanding of your company’s shipping costs requires you to identify carrier package minimums and the full loss of discount rates.