During this unprecedented time of uncertainty, here at LJM we are committed to assisting our clients in the maintenance of their critical supply chains. Over the past few weeks, we have received a myriad of inquiries seeking guidance on how to best navigate the current turbulent economic waters. The most common area of concern has centered on the impact a drop in shipping volumes would have on their contract with the Small Parcel carriers, as these contracts are revenue based.
In order to provide some high level guidance to all our valued clients, we would like to offer the following information:
- A Brief Explanation: The “self-regulating” portion of your Small Parcel Carrier contracts; known as a “Portfolio Tier” with UPS and an “Earned Discount” with FedEx, are typically based on a 52 week Rolling Average of your shipping spend. The 52 week period is designed to create a leavening effect, smoothing out shipping peaks and valleys so that short term fluctuations in shipping volumes will not drastically impact a shipper’s discount. With this in mind, a decline in shipping over a period of a few weeks should not cause most shippers to fall from their current incentive tier. However, as is self-evident, the longer the downturn lasts, the higher the probability exists shippers may fall from their tier.
- Carrier Responses: To date, the carriers have made no announcements as to any sweeping action regarding relief or adjustment to shippers who may experience a decrease in their package volumes. They may decide in the future to provide a blanket remedy to all shippers, or they may leave it to shippers to seek contract adjustments individually. LJM is closely monitoring this situation and will communicate any change in carrier policy to all of our clients. Below are links to the carrier information pages regarding their actions related to COVID-19.
- LJM Assistance for Existing Clients: LJM understands the angst this situation is causing and that carrier contract compliance makes up only a fraction of the many disruptions our clients are dealing with on a daily basis. To assist our clients, LJM is proactively managing all of our client carrier contracts for significant incentive tier adjustments. Should LJM determine a client is in danger of falling out of a current incentive tier, we will reach out to let you know and to discuss potential remedies and next steps.
- LJM Assistance for Non-Clients: We have also spoken to many shippers who are not yet LJM clients, but may need some professional guidance through this confusing episode. We here at LJM would like to express our desire to be a resource for anyone who needs it. Please feel free to reach out regarding your Parcel Carrier agreements, we are here to help.