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The Partial Return of Service Guarantees

April 7, 2021


FedEx and UPS announced this week that they are partially reinstating service guarantees. Both providers suspended guarantees in March 2020, citing unprecedented market conditions due to the COVID-19 pandemic.

First up was UPS who reinstated guarantees for UPS Next Day Air services and UPS Worldwide Express services effective April 5. In addition, the provider extended its delivery time for UPS Next Day Air Saver and UPS 2nd Day Air A.M. to end of guaranteed delivery day (11:59 pm).

Not surprising, FedEx announced they too would reinstate guarantees for certain air products effective April 6:

  • FedEx First Overnight
  • FedEx Priority Overnight
  • FedEx Standard Overnight
  • FedEx International First
  • FedEx International Priority
  • FedEx International Priority Freight

No word from either provider when service guarantees will return for Ground products.

Why FedEx and UPS reinstated just air products is not known but there’s a lot of speculation. Most likely it was about encouraging shippers to upgrade to the more expensive air products for speedier deliveries.

For UPS’ Next Day Air product, for example, revenue-per-piece has been declining since second quarter 2019, however, the volumes have increased. For fourth quarter, 2020, revenue-per-piece increased 1.0% to $16.76 while volume increased 1.9% to 2.29 billion.

service guarantees

 

Meanwhile, for FedEx’s Overnight Box services, for the fiscal third quarter, period ending Feb. 28, volume increased 21.5% to 1.5 billion however revenue-per-piece declined 7% to $21.9.

service guarantees

While the revenue-per-piece for both services appears to be slipping for both providers, they are still higher than each provider’s Ground revenue-per-piece.

So, why should shippers care about service guarantees? Did you experience shipping delays last year? If so, because of the suspension of service guarantees, you did not receive a refund on what you contracted with FedEx and/or UPS for on-time, guaranteed delivery services. Now however, shippers will be eligible for guarantees on these air service products which in turn will help hold FedEx and UPS more accountable for on-time service levels.

Now we wait for the return of service guarantees for Ground services. Stay tuned.

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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The Partial Return of Service Guarantees

April 7, 2021


FedEx and UPS announced this week that they are partially reinstating service guarantees. Both providers suspended guarantees in March 2020, citing unprecedented market conditions due to the COVID-19 pandemic. First up was UPS who reinstated guarantees for UPS Next Day Air services and UPS Worldwide Express services effective April 5. In addition, the provider extended its delivery time for UPS Next Day Air Saver and UPS 2nd Day Air A.M. to end of guaranteed delivery day (11:59 pm). Not surprising, FedEx announced they too would reinstate guarantees for certain air products effective April 6:

  • FedEx First Overnight
  • FedEx Priority Overnight
  • FedEx Standard Overnight
  • FedEx International First
  • FedEx International Priority
  • FedEx International Priority Freight
No word from either provider when service guarantees will return for Ground products. Why FedEx and UPS reinstated just air products is not known but there’s a lot of speculation. Most likely it was about encouraging shippers to upgrade to the more expensive air products for speedier deliveries. For UPS’ Next Day Air product, for example, revenue-per-piece has been declining since second quarter 2019, however, the volumes have increased. For fourth quarter, 2020, revenue-per-piece increased 1.0% to $16.76 while volume increased 1.9% to 2.29 billion. service guarantees   Meanwhile, for FedEx’s Overnight Box services, for the fiscal third quarter, period ending Feb. 28, volume increased 21.5% to 1.5 billion however revenue-per-piece declined 7% to $21.9. service guarantees While the revenue-per-piece for both services appears to be slipping for both providers, they are still higher than each provider’s Ground revenue-per-piece. So, why should shippers care about service guarantees? Did you experience shipping delays last year? If so, because of the suspension of service guarantees, you did not receive a refund on what you contracted with FedEx and/or UPS for on-time, guaranteed delivery services. Now however, shippers will be eligible for guarantees on these air service products which in turn will help hold FedEx and UPS more accountable for on-time service levels. Now we wait for the return of service guarantees for Ground services. Stay tuned.  

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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