Last weekend, my wife and I were craving a steak dinner. We grabbed the kids and headed to a well-known steakhouse chain, famous for their satisfaction guarantee on their food. Once seated, there it was, clearly stated on the front of their menu. “We guarantee the preparation of this meal to your liking, else you don’t pay.” Everything was great…until I received my steak. It was severely undercooked. I asked for medium-well but it was practically raw. No big deal. I sent it back to the kitchen. Ten minutes later, I found myself staring at an overcooked, charred piece of dry meat. It tasted awful. Our server offered to try a 3rd time, but the kids were getting antsy. I’d had enough. It was time to go.
Out came the check and my steak was on it. Serious?!? Clearly there was no confusion regarding my dissatisfaction with the meal. After being questioned, our server explained that I needed to contact their customer service department during normal business hours, within 15 days, to request a refund. What?!?
Any restaurant, or other business that treated their customers this way, would most likely cease to exist. Turns out, however, this very facetious story isn’t so absurd in the world of small package shipping. While this type of behavior wouldn’t be tolerated in most industries, it’s something UPS and FedEx are able to get away with it on a daily basis. Let’s take a closer look.
Open up a UPS and/or FedEx service guide and you’ll find the word “guarantee(d)” over 100 times in each document. Both carriers claim to stand behind their services and tout their “you don’t pay if we deliver late” money-back guarantees. Throughout their networks, both carriers have sophisticated tracking capabilities and can determine, down to the minute, when they deliver a package. They know precisely, when they’ve missed a delivery commitment. They know each and every shipment that is eligible for a delivery refund. When service guarantees aren’t met, they absolutely COULD refund charges automatically. But they don’t. Instead, they knowingly invoice you anyway, hoping you just pay. If you (the customer of UPS/FedEx) want a refund for a late shipment, you must first identify the late shipment in question. Ironically, the way that you will definitively know that a shipment has been delivered late is by tracking it in a UPS or FedEx system, thus proving that they already know about it. Next, you must request a credit from the carrier under the parameters of their refund process. Oh, and they only give you 15 days (from “scheduled delivery date”) to do all of this. Assuming you don't, the money is theirs. Forever.
So why aren’t late shipments automatically credited back? Despite the existence of their money-back service guarantees, the carriers are banking on the fact that most shippers won’t ask for a refund. Crediting shippers automatically for service failures would cost each carrier hundreds of millions of dollars annually. This leaves shippers with 4 options:
1.Do nothing. Accept that you’re paying for late shipments that really should not appear on you invoice in the first place. Chalk it up as the cost of doing business with UPS/FedEx.
2.Sign a service guarantee waiver. Get something from your carrier (i.e additional incentives) in exchange for agreeing NOT to file for service failure refunds. Congratulations, the “guarantee” applicable to the services you use is now meaningless.
3.Audit each shipment yourself. This means tracking every single shipment to identify those that were delivered late and then requesting credits from your carrier. That sounds fun! It’s time sensitive…hopefully nothing falls through the cracks.
4.Delegate the headache. Pay another company to handle the credit recovery process on your behalf. There is an entire $1+ billion industry dedicated to auditing shipping invoices. It’s. That. Big.
“How can they do this?” you may be asking. You probably don’t tolerate this type of behavior from your other vendors. Well, the answer is simple. As the two main players controlling a $100 billion plus industry, you play by their rules if you want to use their services. Finding another steakhouse to eat at is no big deal but finding reliable alternatives to UPS & FedEx is far more challenging.
As co-founder and Executive Vice President of Lojistic, Jared has been instrumental in the company's growth from a three-man show operating out of his living room, to one of the nation's top logistics and transportation cost management providers. The Orange County-based firm, which celebrates 10 years of business in 2015, helps companies with high shipping volumes reduce costs and operate more efficiently. In the process, Lojistic has been recognized multiple times on Inc. Magazine’s list of the nation's top 500 & 5000 fastest growing companies. To read more of Lojistic's blog posts, please visit www.lojistic.com/blog.