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Nov. 25 2008 11:06 AM

“FedEx and UPS are both excellent companies with outstanding service. Their express service is backed by a guarantee (unless you foolishly signed it away for an extra point of incentive), which promises reimbursement of your transpor­tation expense if the shipment does not arrive by the promised date and time. (Note: Effective September 2, 2008, UPS changed its policies on parcel service guarantees and no longer includes the fuel surcharge in its refunds.)”*
Let’s take a look at being foolish. The current October issue of PARCEL will let you know carrier performance and average discounts offered by UPS and Fed EX and the percent of:
  • Delivery performance is UPS 8.1 and FedEx 8.0.           
  • On time service performance UPS 8.1 and Fed Ex 7.9.
  • Refunds for late delivery are UPS 6.7 and FedEx 6.6.
Most refund for service failures are shared 50/50. You can change this percentage depending on how good you are at determining what this refund late delivery service is worth and how competitive and the value added the providers are.
How about we start with a total spend of $1,000,000. The higher your next day and second day shipments are, the greater the dollar amount savings. (Air is expensive). You will notice on page 14 of the PARCEL October issue the discounts range from:
1.     Next day: 39% UPS and 46% FedEx
2.     Two day air: 34% UPS and 47% FedEx.
3.      Ground: 25% UPS and 26% FedEx.
If we foolishly ask for a higher discount and waive the late charge you end up with:
Ø   46% to 48% discount (98% on time): you have a 3.70 % cost reduction.
Ø   47% to a 49%: a 3.77% cost reduction.
Ø  26% to 28% discount (2% service failures): you have a 2.70% cost reduction.
The low 25% to high 47% discounts offered saving, goes from 2.67% to 3.77% reduction.
This goes directly to your bottom line. Wow, and you get to keep it all, no 50/50 split for the use of a software program that takes half of the service refund revenue. The savings happen on all shipments each day, no waiting for a check. You might ask if this will lower your tier entry into a higher discount when you have a rolling average discount program.
 You realize that the UPS total will be lowered by the policy of NOT refunding the Fuel Surcharge. It would appear FedEx has the better “deal.” The carriers will furnish an “on time service report” that you review directly with the carrier.
Oh I forgot, on a $1,000,000 small package spend using an average 2% better discount, you pocket over $20,000 and keep it all. If service levels drop below the 97% to 98% levels say bye to the carrier.
*Cut Your Express Shipping Bill Today,  Joe Loughran  October Parcel
Hank Mullen can be reached at 678-880-8243 or visit