With FedEx and UPS increasing their rates yearly, understanding your shipping contracts is very important. Did the carriers create the complexity in these to increase their profits? When was the last time you read through your carrier contract?
With most FedEx and UPS contracts, there are two main types of discounts: guaranteed and volume-based incentive discounts.
The guaranteed discount rates will be applied to each shipment automatically. Earned discounts are directly tied to your shipping volume. These discounts are tied to your yearly gross transportation charge. Each carrier uses earned discounts to ensure you ship as much with them as possible.
What is included in Gross Transportation Charges?
This usually means only the base transportation charges before:
- Fuel surcharges
- Accessorial/special handling fees (e.g., residential delivery, additional handling, address corrections)
- Duties or taxes (for international shipments)
- Discounts
FedEx Earned Discount
A FedEx Earned Discount is a shipping discount tied directly to your shipping volume or revenue commitments over a specific period. Essentially, it’s a reward for meeting certain spending thresholds with FedEx.
FedEx offers you a tiered discount structure. The more you ship (or spend), the higher your discount. If you ship enough to reach a higher tier in their pricing agreement, you “earn” a more significant discount on future shipments.
FedEx Volume-based incentives and UPS Portfolio Tier Incentives are calculated using annualized gross transportation charges. This means the total amount of the published charges before any discounts are applied. The earned discount calculation usually does not include accessorial fees and fuel surcharges. Both carriers typically use a rolling 52-week average.
UPS Portfolio Tier Incentives
UPS Portfolio Tier Incentives give you additional percentage discounts on top of your base discounts when you reach specific revenue or volume thresholds across a range of services (the “portfolio”).
Unlike a discount tied to just Ground or Air, the “portfolio” refers to the combined spending across various UPS services, such as Ground, Air, International, etc. The more you ship across the entire portfolio, the higher your incentive tier.
So, are incentives so important?
We recently had a client who requested a contract analysis. We found that a percentage of their packages had no discount applied at all. He had guaranteed discounts for Ground shipping; however, all Express service discounts were tied to his portfolio tier incentives. The problem was that this client’s shipping volume placed him in the first tier, and he received no additional Ground or Express discounts!
It is beneficial for a shipper to understand each type of discount and monitor their gross spending to ensure that they benefit from volume earned discounts. Be sure they are not in a tier in which they are seeing zero additional discounts or a tier in which they cannot get any more discounts if their volume keeps increasing. Contact us at Refund Retriever if you have questions or want a free contract analysis.
What does Refund Retriever do?
Each FedEx Ground and Express package you send is guaranteed to arrive on time, or it’s free! FedEx and UPS do not automatically give you these refunds; Refund Retriever monitors your invoices for late deliveries and other billing mistakes. No refunds, no fees. It’s that simple! Gain logistics insight and visibility with our free reports and analytics.
