FedEx’s Money Back Guarantee and UPS’s Guaranteed Service Refund state that for services with guaranteed delivery dates and times, which includes most Express/Air products, arriving more than a minute late entitles the shipper to a refund of all transportation charges. For services with a guaranteed delivery date, like Ground, shippers are eligible for a refund if their shipment arrives a day or more late.
There are some caveats, of course. For example, the carriers don’t address extra charges, such as fuel, through their refund policies, and the refunds typically come in the form of credits, not cash. However, they offer some financial protections for shippers and a channel through which they can hold their vendors accountable.
Or at least that used to be the case.
The carriers originally suspended service guarantees at the start of the COVID-19 pandemic. The first few months saw millions of new residential deliveries per day forced into networks without warning. It made sense to suspend delivery guarantees as essential workers risked their lives to deliver our toilet paper and Amazon purchases.
In December 2020, the federal government’s plan to speed the development of COVID-19 vaccines, Operation Warp Speed, started paying dividends. Vaccines by Pfizer and Moderna received FDA approval but required ultra-cold storage during each leg of their journey from manufacturing to administration. Only the nation’s two largest logistics companies, FedEx and UPS, could be entrusted with the massive logistics effort.
FedEx and UPS performed admirably, perhaps even heroically, delivering the vaccines during their busiest time of the year without major disruptions to their domestic and international parcel delivery networks. The continued suspension of service guarantees was a small price for consumers to pay for these lifesaving efforts.
But that was then. Over time, vaccines became readily available and required fewer time-sensitive deliveries. Consumers no longer needed the herculean effort displayed by UPS and FedEx in those early months, and the carriers’ networks returned to a more normal workload. As a result, in mid-2021, both carriers reinstated service guarantees, but only for their most expensive Overnight and Next Day/Express services.
At the time of writing, UPS and FedEx still force shippers to accept delayed deliveries on services like Ground and two-day services without any monetary relief. They make more money when they can wait a day or two deliver without the threat of issuing a refund.
The lack of a service guarantee has real and significant consequences for shippers. With guarantees in place, shippers can pass refunds on to consumers and repair any damage to the seller/consumer relationship caused by UPS or FedEx making a late delivery. But when carriers withhold these guarantees, they force sellers into a tough decision: attempt to save a long-term customer by offering a shipping credit and taking a total loss, or offer an empty apology and hope the customer will return.
Shippers shouldn’t have to make this call, and many shippers unhappy with the high cost and low value of UPS and FedEx deferred air and ground services are finding new alternatives.
Traditionally, shippers had few options when dissatisfied with UPS and FedEx. But times have changed, and regional carriers (regionals) and postal consolidators have become far more prevalent and reliable over the last few years. For many large shippers, regionals and consolidators already provide a necessary alternative to FedEx and UPS.
Regionals are flourishing, largely thanks to network constraints reported by the major carriers. Unlike the nationwide networks of FedEx and UPS, regionals often limit delivery to a few states, but at a fraction of the price. This limited focus enables one-day delivery across most of their territory, often beating FedEx and UPS by one to two days. For smaller shippers, exploring regional alternatives has never been easier, with many shipping systems capable of processing and tracking packages for both regional and national carriers.
Moreover, many regionals offer the money-back guarantees the major carriers continue to withhold.
On earnings calls, UPS and FedEx executives downplay the viability of utilizing regionals, touting their end-to-end networks as valuable differentiators. Through punitive, zone-based charges, they also push shippers to stage inventory as close as possible to end consumers, because shorter distances produce higher carrier profits. But by pushing shippers to stage redundant inventory in every major region, UPS and FedEx have diluted the value of the nationwide, end-to-end network. They stoked the need for smaller regional fulfillment footprints, arrogantly ignoring that regional carriers can now deliver every shipment from many of these sites either faster, cheaper, or both.
This isn’t an entirely new development. Before COVID, UPS and FedEx made cost-cutting a priority across their organizations. The pandemic dramatically accelerated those cost reduction efforts, negatively impacting shippers and consumers. Many late deliveries are now the avoidable result of carriers placing artificial constraints on their networks to improve profit margins. For example, UPS and FedEx cut operations staffing to such a degree that commonplace, once-manageable occurrences now create backups preventing dozens or even hundreds of packages from meeting their “promised” delivery date. Before the pandemic, this would have been unacceptable for either carrier. Redundancies were in place to handle inevitable operational issues, and there were consequences for letting packages sit an extra day in their hubs.
Without money-back guarantees in place, however, UPS and FedEx often purposely delay shipments to increase their delivery density and increase their profit per package through intentionally late deliveries.
That is not the service customers pay for. Where is the “Customer First” mentality?
Accountability is the core issue here. FedEx and UPS proved they can deliver on time, even when confronted with unprecedented hurdles and held to extremely high standards, as they were during Operation Warp Speed. And yet they have claimed extreme hardships and levied historically aggressive rate increases to “cover additional costs,” while their margins ballooned and profits soared to record highs. If UPS and FedEx could afford service guarantees before they had record profits, they can certainly afford them now. It is time for shippers everywhere to insist that UPS and FedEx reinstate all their Guaranteed Service Refunds and Money Back Guarantees.
If UPS and FedEx want to keep you as a customer, they need to hold up their end of the bargain.
After starting his career in freight forwarding, Matthew Sumowski spent four years with UPS, most recently as a senior account executive, before joining Shipware in 2022. He brought with him extensive experience optimizing complex supply chains and negotiating carrier contracts. Matt worked with some of the largest shippers in the country and understands how to align their needs with the revenue strategy and inner workings of the major carriers.
