Since the dawn of guaranteed service refunds in the ground parcel industry over four years ago, a number of issues have arisen. Some issues have been good, some bad and some have been downright ugly. Before discussing these issues, let�s do a brief review of how we got to where we are today.
The Evolution of Guarantees
Guarantees for expedited services have been in existence for three decades, long before the ground guarantees. However, for a variety of reasons, not many shippers monitored on-time service in the 80s and early 90s and, subsequently, were unable to take advantage of the money back guarantee. UPS management assumed this laissez-faire approach would continue and, coming off the throes of the 1997 UPS Teamster�s strike, felt it needed to attract national attention to recapture lost market share. So in 1998, the guarantee for ground B2B shipments was launched. Remember the full-page advertisement in the Wall Street Journal? Shortly thereafter, FedEx Ground predictably followed suit. FedEx Ground then upped the ante in 2000 when it launched its FedEx Home Delivery guarantee of timely residential deliveries. After much deliberation, angst and analysis, UPS announced its residential ground guarantee in August of 2002.
The Good
Overall, on-time service for shippers has improved. Credit must be given to the carriers for �stepping up to the plate� here. Both ground and expedited services have improved, even though expedited guarantees existed long before ground guarantees.
Why such improvement? For one, there is more accountability and visibility for on-time service performance. Shippers now have an opportunity for recourse they previously did not have: monetary compensation for late shipments.
Uh, wait a minute. Didn�t I just say expedited guarantees already existed long before ground? Yes, I did. However, since the vast majority of shippers did not have the volume of business to actively pursue the guarantees, many did not. In fact, shippers actually requested refunds on less than one percent of late shipments. Now that ground guarantees are in effect, however, there are many shippers who are holding carriers accountable for timely deliveries. The number of requests for refunds has also grown exponentially. As a result, the carriers have responded by investing more into their operations to improve service, as opposed to continuously paying refunds to disgruntled customers.
Now, here�s a thought for consideration. If one (read: carriers) were to be continuously jabbed by a sharp stick (in other words, guarantee service refund claims), I would assume one could improve the situation (better on-time performance), or one could restrict the number of sharp jabs he receives (in this case, make it even harder to get a refund). As noted above, service has improved, hence the �good.� Now, on to the �bad.�
The Bad
Restrictions � The carriers never said they were going to make it easy for shippers to actually get refunds. But they have made it more and more difficult over the past few years by adding more and more restrictions on claims. For example, they have decreased the window to file claims from 30 days to 15, insisted on including �no guarantee� clauses in contracts or have restricted the guarantee only for the amount below a certain on-time percentage (e.g., 98%).
It�s good to be the king � Shippers are required to provide detailed package-level information to the carriers that enable them to provide valuable services like tracing, delivery confirmation and en route status of shipments. Then they turn around and threaten to charge you for tracing too many packages. Gee, how else can you find out when your packages are delivered? And you always wondered what Brown could do for you!
Service standards with an asterisk � Beware of the dreaded asterisk! You can�t be sure of what you�ll get. Perhaps the most egregious practice in this category is advertising overnight ground service but measuring on a two-day standard. If you are going to measure on a two-day standard, don�t call it overnight service! Another practice is to build extra slack in transit time schedules; for example, the scheduled service is three days, but that may be a little too �tight,� so they measure it on a four-day standard. Some carriers exploit the asterisk more than others.
�Not eligible� � Granted, shipments may be late for reasons out of the carrier�s control (e.g., no one is available, holidays, weather, etc.), and all of these valid reasons have corresponding exception codes that will inform the shipper why the shipment was late. However, on one carrier�s audio response system, shippers are greeted with the confusing reply of �not eligible� for a requested claim on a late delivery. Either the shipment is late and should be honored, or it is late for a reason out of the carrier�s control. �Not eligible� just doesn�t cut it.
Incorrect claim submittal by shippers � This point is an uphill battle for the carriers. Some shippers will submit claims for late shipments based on incorrect data. The most notable occurrence is using an incorrect shipment date. This is caused by the shipper�s transmitting the package data before tendering the actual package to the carrier.
The Ugly
I�m sure I�m not the only one to have found e-mails in my inbox that say: �Work from home; be a FedEx/UPS claim processor!!!� Like most other work-from-home schemes, it went immediately into the deleted items folder. After deleting it, I noticed postings on Parcel Shipping & Distribution�s Web site inquiring about this incredible(sic) opportunity. Well, my advice to these folks would be not to quit your day jobs. This advertisement is using incorrect infor-mation and exaggerations to get people to take the plunge. For example, the ad states seven percent to 10% of all FedEx and UPS packages are delivered late. There have not been that many late deliveries for these two carriers in over 10 years. The ad goes on to say that no industry experience is necessary. Wow, you mean that I can do the same thing that other people who have 20 years of experience and have intimate knowledge of carrier operations can do? Give me a break. This can only lead to further frustration on the carrier�s part by being inundated with claims based on inaccurate data.
It has been an interesting four years thus far. We will keep close watch as this story continues to unfold. The decision to offer guaranteed ground service was a bold and momentous event for the parcel industry. The most beneficial outcome for shippers has been improved on-time service. Let�s not forget that. Also, let�s not forget that carriers have a responsibility to be fair and accurate and to honor refunds for shippers. Isn�t that the promise?
Joe Sudar is executive vice president of SmartTran, Inc. For more information, he can be reached by phone at 724-378-6471 or by e-mail at sudar@smarttran.com.
