Many shippers really have no clue on how the carrier package minimum charge from FedEx and UPS minimum affect their overall shipping spend. Most companies do not realize carrier package minimums basically override a large percentage of the negotiated discount rates.
So what is the 2020 Minimum Net Charge?
Carrier package minimums 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|
|Ground||$ 8.23||$ 8.23|
|3 Day Air||$ 11.67||$ 16.85|
|2 Day Air||$ 19.30||$ 19.11|
|Next Day Air||$ 30.62||$ 30.31|
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”
How Does a This Effect a Shipper?
As an example, here is 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.
These charts indicate all the zones and weights that are affected by the net minimum charge. The effective discount for a zone 2 one pound packing is zero percent, no discount at all. The effective discount with the net minimum charge will have a huge impact on shippers with low weight shipments.
Negotiating Better Minimum Terms
Package minimums are negotiable, even if your carrier representative insists they aren’t. The biggest questions are how many of your packages are 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.
Carrier Package Minimum Charge 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. In conclusion, a complete understanding of your company’s shipping costs requires you to identify carrier package minimums and the full loss of discount rates.