UPS Shippers: Read the Fine Print!
Daily Rates vs. Retail Rates
The difference between the daily and retail rates reflects an even more dramatic price difference: a 14.3 percent average increase for NDA; 24.5 percent higher for NDS; 27.4 percent higher for 2DA; 35.8 percent higher for 3DA; and 44.2 percent higher for ground.
Changes to UPS Deferred Threshold Agreements
It doesn’t stop there. Shippers renewing or signing up for UPS “Deferred Tier Threshold Agreements," more popularly known as “Quarterly Rebates,” should be careful to review the fine print.
The Deferred Tier Threshold is a UPS incentive program that rewards shippers by rebating a negotiated percentage of net spend each quarter back to the shipper. Tied to revenue threshold targets, the program provides an opportunity for shippers to receive additional discounts in the form of a quarterly payment while enhancing UPS’s customer retention goals.
While I’d rather get the additional discounts up-front, the program works well for some shippers, especially those that charge shipping costs back to their customers. The rebate can make shipping a profit center.
However, for the past year or so, UPS added five words to these agreements that can strip out a lot of the incentive: “subject to all applicable minimums.”
Take this example: A shipper up for contract renewal negotiated a new 8 percent Deferred Tier incentive, two times better than its previous 4 percent. However, the shipper didn’t take into account the importance of “subject to all applicable minimums”.
As a predominately lightweight shipper, discounts are mitigated on more than half of all shipments due to minimum shipment charges (in 2011, the minimum is $5.17 for ground shipments). After signing a new agreement that was supposed to double its quarterly rebate, the net result was that the rebate was halved — only 2 percent of the net transportation charges.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.