Everything is seemingly more expensive these days with rampant inflation. As the economy continues flirting with a full fledge recession the last thing you need as a Shipper is other companies taking advantage of you and charging more than necessary. It’s a tale as old as time — UPS and FedEx ‘teaming up but separated’ in their approach to overcharging customers, introducing/raising accessorial fees and turning off key customer benefits. Now is the time to say enough is enough and break away from the duopoly that has been taking advantage of shippers for decades. There are plenty of other shipping options out there. In this piece, we will look at why it is time to break away from UPS and FedEx and what options are out there for shippers.
Money Back Guarantees Have Not Been Reinstated >2.5 Years Later!
So both Purple Promise (FedEx) and Big Brown (UPS) suspended their money back guarantee (MBG) programs back in February and March, 2020, respectively. And this made total sense at the time as this was the start of the COVID pandemic. We all know how challenging 2020 and 2021 were due to the impacts of the virus. That said, it is now July 2022 and there are still services that do not have the money back guarantee reinstated. Hmmm.
Let’s back up in case you are unfamiliar with the money back guarantee — UPS and FedEx introduced this many moons ago. Each service level has a published service standard. If either carrier misses the service standard by even 1 minute the package is considered ‘late’ and the shipper is eligible for a money back guarantee refund. Now, these refunds are not automated. The Shipper or Freight Audit & Pay (FAP) company will have to file MBGs for each shipment. Then, the carriers look at each on a case-by-case basis. If there was severe weather or a mechanical breakdown that led to a package being late, then it is not covered. There is an ‘Act of God’ clause that can be used for disruptions outside of the carrier’s control that can be wide spanning.
A lot of people associate the MBGs with Express service levels (Overnight, 2 and 3 day). However, the MBGs are also applicable to Ground products. For UPS that is Residential or Commercial Ground and for FedEx that is Home Delivery or Commercial Ground. There are far more ground shipments than express for most shippers. UPS and FedEx have reinstated the MBGs for Express services but NOT for Ground. So 2.5 years after the pandemic, Shippers are still getting taken advantage of by UPS and FedEx.
One interesting tangential note: UPS and FedEx have both been trying to negotiate the Money Back Guarantees out of the service contracts they sign with Shippers, especially medium to larger sized clients. They try to give discounts in other areas to offset. The carriers do not like giving refunds for packages they still ultimately did deliver.
Fuel Surcharge Tables Constantly Changing
First, let’s be logical. Fuel has never been more expensive, both diesel (Ground services) and jet (Express services). We should collectively expect to pay a little more in fuel surcharges for shipments in this current landscape. However, the carriers have overreached here as they have done for many years. If it wasn’t so sad it would be comical: the number of times UPS and FedEx have changed their fuel table calculations in the past 5-7 years. There have been years where it has changed multiple times. Spoiler alert: they never change in the customer’s favor. Here is the most recent UPS fuel surcharge for the past four weeks
If today you shipped a Ground package you would pay 18% FSC (fuel surcharge) and if you shipped a Domestic Express shipments you would pay 23.75% FSC If all other things are consistent, several years ago this looked more like 10% and 15% at these levels. The carriers continuously change the fuel tiers — eliminating the lower ones and adding higher tiers, changing where fuel surcharges are applicable (both now charge fuel on additional accessorial charges!) Now, FedEx’s table is not provided here but their Express matches UPS and their Ground rate is actually higher at 19.50% currently.
So let’s look at a live example:
Freight Cost – $10.00
Residential Delivery Fee – $2.50
Subtotal – $12.50
Fuel – $2.96 (23.75%)
Total = $15.46
Now, if you think FedEx and UPS are paying $2.96 in fuel for that package to be delivered I have some swamp land I would like you to look at. These guys are making serious margin on the fuel fees and it is wildly underreported.
Accessorial Fee Manipulation
This is the one that really sticks in my crawl. If it isn’t bad enough to be paying exorbitant fuel surcharges and freight rates already, the two carriers can absolutely crush your business with accessorial fees. These fees are everything non- freight or fuel. There are a lot of them and they can add up quickly. I’ve been in logistics for 20 years now. When I first started out accessorial fees would make up 5-7% of a Shipper’s spend. Now that number is easily 15% on average and goes as high as 25% on some accounts.
Here are some of the most common accessorial fees the carriers charge: Additional handling, delivery area surcharge, large package surcharge, weekly pick up fees, address corrections , and about 50 others.
Not only do these fees go up mostly every year, they also can and will add fun new accessorial charges throughout the year. It is not secret that FedEx and UPS have been trying to reduce (and in some instances eliminate) larger packages from their network. These packages obviously take up more room in vehicles and airplanes. The large package, oversize, and additional handling fees have gone up over 1,000% at each carrier the past several years. Seems fair.
The Wrap
If there is one thing you learned from this article, please let it be UPS and FedEx DO NOT prioritize your interests > their corporate interests. Your Sales Rep may tell you otherwise, but I’ve got the receipts from decades of interactions. The carriers take all of your shipping data and manipulate it to make them the most margin, very rarely is there an exception.
Then, once you have executed a contract, the carriers will suspend things that cost them money (MBGs) and add more costs for shippers in areas that will make them more money (changing fuel tables and raising/adding accessorial fees).
There are plenty of alternative shipping solutions which we have covered in other blogs. Shippers should be looking hard and long at USPS direct (no fuel or accessorial fees), USPS Consolidators (one flat fee!), Regional Carriers, and any new tech that is coming into the shipping and fulfillment space. The duopoly of UPS and FedEx does not care about you as a shipper and they never will…until it’s too late.
Lessgistics has 20+ years in negotiating and procuring shipping rates. Get a free, no obligation review today to see if we can save you money on your shipping expense!