UPS and FedEx are increasingly convincing shippers that they are giving them a treat: bigger discounts and better incentives in exchange for waiving the right for guaranteed service refunds. But is this really a treat for your company, or is it a trick to boost the bottom line of the carriers? It could be either, and the only way to find out is to have a comprehensive shipping analysis done by a professional shipping auditor.
If you are a heavy airfreight shipper, you are likely to be offered attractive incremental incentives in exchange for waiving GSR, since airfreight has more frequent delays and therefore the potential for greater refund costs for the carrier. In this case, agreeing to the waiver may cost you more than you would save on the incentives in the long run. Trick.
If you ship mainly by ground, you likely won’t be offered much of a discount or incentive. Since the carriers have a good record of on-time performance with ground parcels, they won’t be eager to dilute their profits by offering an incentive. Waiving GSR may make sense for you. Treat.
A mix of air and ground? You may or may not benefit from a waiver. It is especially important for a shipper like this to have a detailed impact assessment done to determine if a waiver makes sense for you.
What if you’ve already agreed to a waiver? It’s not too late to benefit from an expert shipping auditor. The auditor can do a detailed analysis, and if the incremental incentive does not offset the GSR’s the shipper can ask the carrier for an amendment to their agreement based on the assessment findings.
What does an impact analysis include? It will look at the shipper’s current shipment profile and their on time failure rate. Measuring this against the incentive to waive the GSR, the assessment will show if it is in the shipper’s best interest to accept the incentive or to keep the rates at their current levels and reap the benefits of the refunds. It is critical to hire a third party auditor to help with this determination, because although the data is easy to get, it is difficult to analyze without intimate knowledge of the carriers’ inner workings and how GSR’s are calculated.