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Guaranteed Service Refund Waivers: Who’s Really Benefiting?

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A Guaranteed Service Refund Waiver, or GSR Waiver as it is commonly referred to, is a contract provision that has been appearing more and more in new contracts from your Parcel transportation and logistics providers.

Should your company agree to accept such a waiver?  

By agreeing to the waiver provisions in your contract your Parcel Carrier typically agrees to provide you with additional pricing incentives to reduce your annual freight spend. In return, you forfeit your company’s right to file claims for refunds for late deliveries.

This doesn’t sound so bad, does it? You get some extra savings on your annual parcel spend and you don’t have to worry about auditing your invoices to submit claims for late deliveries. Everybody wins…or do they?

According to industry experts, every year an average of $2 Billion goes unclaimed in late delivery refunds from the major Parcel Carriers. It all comes down to the numbers.

Will my company benefit from signing a GSR Waiver?  

The answer is, it depends. If you are saving $30,000 per year in additional discounts by signing a GSR Waiver, but losing $100,000 per year in Guaranteed Service Refunds, it’s obviously not worth implementing that provision in your contract.

The best way to know is to have an audit performed on your invoices. Logistics Consulting companies have the know-how and technology tools to quickly and efficiently audit your company’s parcel invoices to determine which avenue is most beneficial to your company. Most often, it takes less than 30 minutes to gather the information needed for the audit and about two months to get a comprehensive analysis performed that will arm you with all the pertinent information you’ll need to make the proper decision.

We always say, “knowledge is power!” And in that regard, here is a great example of how Knowledge truly paid off for one of our clients.

Recently we initiated an audit for a new client’s Parcel Carrier invoices.  The company had an $8 million annual parcel spend. After our comprehensive audit, we uncovered that even with their GSR Waiver,they were entitled to and actually received approximately $8,000 in refunds. However, had they not had the GSR Waiver in their contract this company would have received refunds of approximately $500,000 for a year. $8,000 vs $500,000. That’s not chump change! And, the most important fact we uncovered is that the client had no way to identify just how much savings they received in additional discounts, if any, not to mention losing complete visibility of the Parcel Carrier’s delivery service.

So before you sign away your company’s right to file and receive refunds for late delivered packages, make sure the additional pricing incentives far outweigh the potential refunds the company would receive by not agreeing to the waiver.

And, one final point!  Most shippers that do sign away their right to file claims for late deliveries also often do not feel it is necessary to audit their Parcel Carrier invoices because of the waiver.  That too is a big mistake because it takes away the shipper’s ability to audit for many of the other refundable errors that occur on a regular basis.

 

Deal

Seven Steps to Better Negotiating: Tony’s Top Tips

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We’ve said it before…negotiation is a fine art. Whether you are negotiating logistics contracts, salary terms or new partnership agreements, proper negotiating tactics yield tremendous results. Below are seven of my top tips for negotiating in business and beyond.

1. Know The Rules. The better you know the rules of engagement, the more effectively you’ll make your case. By rules, I mean the terms that govern the buyer-seller transaction. Terms can be detailed in the contract you signed, defined by state or federal legislation, codified by regulatory decisions, or specified in industry practices or codes of ethics. The rules may be complex and always subject to change. Don’t negotiate anything until you know all of the rules you will be subjected to.

2. Update Your Knowledge Base. In other words: Keep current on industry trends and keep learning. The more you know about your business, and the more you know about your suppliers’ business the better off you’ll be.

3. Bring Time To The Negotiating Table. While money is rarely, if ever the only transaction variable, often it becomes the sole focus of negotiators. You know the scenario: one side says $X, the other says $2X, and confrontation begins. To break the logjam, bring other variables to the negotiating table such as time. Can you, for instance, accept a protracted delivery schedule? Will your vendor further discount the invoice if you pay their invoice promptly? Can your service provider accept payment in 60 days rather than 30 days?

4. Give To Get. Before you sit down at the negotiating table be prepared to offer several concessions in return for what you actually need.

5. Understand Your Own Goals. Too often businesses sit down at the negotiating table without having assessed their own long-term goals. Ask yourself: What do you really seek from your supplier or strategic business partner in this intended relationship? What will it take to arrive at that goal? The answers may totally reshape your deal-making process.

6. Never Use Criticism To Leverage Price. Yes, most businesses sit down at the negotiating table to lower their costs. But don’t knock the service provider’s service currently being provided to your company, don’t belittle the other teams negotiator or the products they sell and don’t demean the vendor to get what you want . Believe me, you won’t. get what you think you’ll get.

7. Always Be Courteous and Professional. I’ve seen too many negotiations boil over because the parties at the table took things personally. Remember this is not about you, it’s about achieving desired results that affect many more individuals than yourself.

I hope these tips prove helpful to you.

The Impact The Panama Canal Expansion Will Have On Shippers

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The opening of the expanded Panama Canal, originally planned for 2014, is now set for next April. Workers are currently implanting the third set of 22-story lock gates that will accommodate what are called the Post-Panamax vessels, massive ships carrying up to 14,000 TEU container equivalents of freight. Even more expansion may be in store in the future. Earlier this spring, the Panama Canal Authority revealed it’s studying the possibility of adding a fourth set of locks which would accommodate an even newer generation of ships carrying 20,000 TEU container equivalents – in other words, Post-Post-Panamax vessels.

Racing to keep up with how this will play out in the world, logistics service providers and government officials across the globe quickly announced dozens of supply-chain infrastructure expansion projects across North America as well as other parts of the world. Ports across the Southeast and the Gulf Coast anticipate receiving the biggest direct impact. The ports of Miami, Baltimore, Charleston, Jacksonville and Philadelphia have long been digging, dredging and building to accommodate the larger Post-Panamax ships.

The Port Authority of New York and New Jersey plans on expanding capacity by raising the Bayonne Bridge. Georgia and South Carolina ports are cooperating on developing the new Jasper Ocean Terminal, a $500 million project that will handle 7 million cargo containers each year.

Ports are not the only platforms to be effected. The Panama Canal expansion will exert enormous impact on all forms of intermodal transit. Even before the canal officially opens, major infrastructure upgrades are underway at various inland locations. Atlanta, Chicago and Columbus are getting ready to handle much more traffic, as is Dallas, another non-port city. Rail operators, trucking companies and even airlines have been investing in infrastructure improvements in anticipation of Post-Panamax.

Some studies done on the impact of the expansion, including an often-cited report by Cushman and Wakefield, project a significant impact on intermodal transit. Rail and maritime transport, usually lower mile-for-mile than trucking or air, may also absorb substantial new business as shippers look to minimize their trans-shipment cost exposure.

Not everyone thinks the Panama Canal expansion will be “the greatest thing since slice bread” however. A report back in 2014 by Allianz Global Corporate and Specialty (AGCS) highlights certain risks that are inherent with the expansion in their report entitled “Panama Canal 100: Shipping Safety and Future Risks.”

In that report, Allianz points to the following risk factors:

  • Doubling of traffic through the Canal will increase the value of insured goods moving through the canal by approximately $1 Billion per day
  • General concerns about the increased size of the vessels moving through the Canal resulting in potential increased losses
  • Potential delays at US ports due to the mere size of these larger ships with the potential of interruptions in business; can you say “West Coast Port slowdown?”
  • Potential blockages in an already congested shipping environment
  • Estimates of 12-14 larger vessels passing through the canal on a daily basis, equating to 4750 additional ships per year

The reality is that with these larger ships, larger issues and concerns are definitely a possibility.

To move from what could be termed “negative” impacts of the widening of the Panama Canal, transportation and logistics consultants like me are busy scrutinizing the canal expansion from the perspective of transportation costs. It’s still too early to talk numbers, but I think overall shippers will see reduced costs per unit, reflecting obvious economies of scale. Shippers who can tolerate all-water routings of up to four weeks can anticipate the biggest savings, provided vessel operators resist taking advantage of their shipper customers by hiking up rates.

I also expect that some savvy entrepreneurs will introduce a few new supply-chain solutions based on the new economies of scale. There might be real value there too, we’ll just have to wait and see. Speaking of potential “real” improvements, wouldn’t it be great if someone could permanently fix the chassis situation at all ports; we can dream can’t we?

Expanding the Panama Canal is going to shake up the world of logistics. Freight volume will increase significantly while transit times should decrease. Shippers who look carefully for various savings opportunities will surely find them. Personally, I’m looking forward to the new Panama Canal opening and the challenges it will bring!

Tony