As recently reported by Multi Channel Merchant, and without a lot of fanfare and advanced notice to their shipper customers, UPS is ending a freeze on earned discount tiers based on large shipping volume drops caused by COVID-19 lockdowns. This change will apparently affect some UPS parcel shippers to experience increases in the 10% to 30% range, especially if those shippers experienced a drop of two or three tiers within their current contracts.
According to the Multi Channel Merchant article, the initial freeze went into effect last April, based on 52-week rolling average volumes as of early March, 2020, just as the lockdowns were going into effect. UPS took it off around the weekend of July 10-11, catching many shippers by surprise.
UPS’ freeze, and a similar freeze from FedEx had provided a form of relief from the onslaught of peak surcharges from both major carriers over the past 16 months. It’s uncertain at this point if FedEx had also ended its freeze.
“I can tell you I was not on a freeze because I dropped a tier last year, and this upsets me,” said the VP of operations for an apparel retailer. “My UPS rep told me they did freeze tiers for specific customers who were detrimentally impacted by the COVID shutdown, whatever that means.”
Examples he was given were things like book companies supplying schools or live event ticket companies. “She did confirm that it was based on a review of very specific customers, but I didn’t get an answer as to why they were included and I wasn’t,” he said. “If I follow her logic even though I dropped a tier for a while my drop in volume wasn’t enough to look at.”
Another, a director of transportation for a sporting goods retailer, said he had heard of the freeze but it was a non-issue for him “as our earned discount actually improved as business took off during COVID.” A third, a VP of transportation for a subscription CPG retailer that ships with UPS, said he hadn’t heard of the freeze but noted “any shipper executive who asked for this or had it offered to them should have made preparations for the time this would end.”
“We instituted a process as a temporary goodwill gesture to help customers who would otherwise have experienced a drop in incentive levels as result of the pandemic,” said UPS spokesman Matthew O’Connor, referring to the freeze. “We have recently returned to the normal terms of our agreements.”
“FedEx has been operating at peak levels since last March and has been working closely with our customers to help them navigate this new normal accelerated by the COVID-19 pandemic,” said FedEx spokesman Chris Allen. “We have worked proactively with our retail customers to minimize the effects of unpredictable shipping volumes.”
Our advice to all parcel shippers; there is no better time than the present to analyze their current contracts as we enter Peak Shipping Season 2021. Does their current contract provide them with the ideal pricing they need to remain profitable as business ebbs and flows in this continuing Covid-19 business environment? And, the best way to ensure that the contract analysis is sound and accurate is to rely on an independent Third Party to benchmark all parcel pricing contracts to allow them to sleep well at night, every night.
Need help navigating your contracts after this latest news? Contact ICC Logistics and let our experts help you better understand where you are and where you need to be in terms of ideal pricing for your business.
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