Editor's Note: This post has been updated with new links and content.
Original Publication Date: April 14, 2016
Today we’re going to explain and provide a better understanding of service guarantees.
Let’s start with an explanation of UPS and FedEx’s service guarantees.
UPS and FedEx Service Guarantees
In the small parcel world, UPS and FedEx have different service levels. You can select air, and within air services you can choose next-day, two-day, or three-day. There are also deferred services like ground. And each of those services, parcel hybrid services excluded, comes with a service guarantee.
In short, if you select next-day air and ship via UPS, they guarantee that your package will be delivered by a certain time. That is their service guarantee.
Carriers tout their guarantees when they sell their services. It's the reason companies upgrade their services from a slower option like ground or three-day air. If you know that quicker service is guaranteed, you’re probably more willing to pay extra for that service.
In that same vein, if carriers don’t meet that guarantee, you are entitled to a refund for the transportation charge portion of that shipment.
Let’s say you ship an overnight package, for example, and it's not delivered overnight, it's delivered in two days. Because of that guarantee, you’re eligible for a refund or credit for that particular shipment.
Differences in Ground & Air Service Guarantees
Air services are different from ground in that they are guaranteed by either day or time. Ground shipping is only guaranteed by date.
That said, regardless of the service you choose, you should get some form of service guarantee. Further, unless you sign a waiver, service guarantees include the ability to get your money back for a shipment that doesn’t meet the agreement.
Recovering Transportation Fees From Late Shipments
Now, the carriers have sophisticated tracking capabilities, and they guarantee their services and know when they deliver a package late. The onus is still on the shipper, however, to contact the carrier regarding the late shipment.
If you think you’ll just get credit for a shipment because the carrier knows it was late, that's not how it works. Shippers have to track packages themselves, even though you’re usually using the carriers’ tracking system to prove that the shipment was late.
First, you have to track the package and determine that it was delivered late. Then you have to get on the phone with UPS or FedEx to try to reclaim the cost of that shipment within a 15-day window.
So if you have thousands of shipments and need to track every package, there's no way you can track every single one manually.
This begs a question: why don’t the carriers automatically give you your money back when they know they didn’t meet their service guarantee?
The answer is clear -- the carriers are banking on the fact that most shippers won’t request refunds for late shipments because of the amount of tracking involved. More bluntly, crediting shippers for service failures automatically would cost the carriers millions of dollars a year.
Further, if you pay for a higher service level guarantee than the carrier fulfills, the same lopsided rules apply.
If you pay for next-day-air delivery and the carrier delivers it in two days, you’ll still be charged for the next-day service.
Leveraging Late Shipment Credits
Filing for late shipment credits, then, is your job as the shipper. And there are four options for shippers who use these carriers.
1) Do Nothing
Unfortunately, too many companies don’t do anything about their late or overcharged service level guarantees.
A lot of companies are putting out thousands and thousands of shipments, and tracking those details just isn’t a priority. And rightly so, frankly — it really isn't a good use of anyone's time to do that manually.
Many shippers just accept the fact that their carriers are keeping money that they aren't entitled to.
2) Service Guarantee Waiver
The second common option is companies that choose to sign a service guarantee waiver. As the shipper, you waive your right to file for credits or refunds when the carriers don't meet their time and transit commitment.
For those that decide not to file for late shipments, this seems like a legitimate option, but we would never advise somebody to sign a service guarantee waiver, because the carrier is no longer held accountable.
At this point, why pay for an upgraded service if a guarantee doesn’t come with it? The carriers may offer something in exchange for signing the service guarantee waiver, but again, your carrier can’t be held accountable without an associated guarantee.
The third option is to self-audit. Some companies that have thousands and thousands of rows of invoice data, too much information to review manually, use an internal auditing tool. For example, some use Quantum View or Insight, which are UPS and FedEx products that help shippers track packages.
Now, if your carrier is providing you with the technology to audit them, there's an increased likelihood that something will fall through the cracks. Especially since the carriers are the reason you have to take extra steps to secure these refunds.
4) Outsourced Technology
The fourth and final option is outsourcing your auditing to a company like Lojistic. Lojistic leverages proprietary technology that audits every single shipment for on-time performance. It also looks for other common carrier mistakes and errors.
Outsourcing can ensure that your bills are accurate. It can also reduce wasted payments for shipments that were delivered late or didn’t meet their guarantee. You can have peace of mind in knowing that you aren’t paying your carrier any more than you should be.
For more information on how you can join the thousands of businesses currently using Lojistic to help monitor, manage, and reduce their shipping costs, please contact us here.